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When is a beneficiary a minor for pension benefits?

Published

2017

Wed

22

Mar

 

By Gennel Chettiar, Norton Rose Fulbright South Africa Inc.

If a right is vested in a child before 1 July 2007, the age of majority of the child is 21 years (not 18 years), including for prescription purposes.

On 22 February 2017 the Pension Funds Adjudicator (PFA) made a determination in the matter of Maphoyisa v Municipal Gratuity Fund and Sanlam Life Insurance Limited (Maphoyisa case) which gave a very clear indication of the approach it adopts to prescription.

The complainant, who was born on 10 November 1997, lodged a complaint with the PFA on 22 November 2016 following the Municipal Gratuity Fund’s (Fund) decision not to award him a portion of the death benefit payable pursuant to the death of his father who was a member of the Fund. The complainant alleged that he was a dependent by virtue of a maintenance order and that the trustees of the Fund had failed to act rationally and lawfully by not taking into account his dependency when exercising their discretion to pay out death benefits in terms of section 37C of the Pension Fund Act 1956 (Act).

The decision of the trustees of the Fund was taken in 2004, twelve years before the complaint was lodged. At the time of the decision the complainant was a minor; he turned 18 on 10 November 2015.

The Fund did not deal with the merits of the complaint. Instead the Fund relied on the Prescription Act 1969 which stipulates that if the creditor is a minor the period of prescription will not be completed before a year has lapsed after the day he ceases to be a minor. The Fund argued that the complainant was out of time to lodge a complaint as his claim prescribed on 10 November 2016 (1 year after he turned 18) and the complainant only lodged the complaint on 22 November 2016.

The PFA considered the Children’s Act 2005 (Children’s Act) which changed the majority age to 18 years from 1 July 2007 as well as the Age of Majority Act 1972 which was applicable prior to 2007 and had the majority age at 21 years. The PFA then referred to a Supreme Court of Appeal finding which essentially provided that legislation cannot have retrospective effect, unless the new legislation expressly states it applies retrospectively (where it impairs a vested right acquired under existing legislation).

In light of this, the PFA reached the conclusion that since the Children’s Act did not state it applied retrospectively and the new majority age would impair the rights of the complainant, the majority age of 21 must apply to the complainant. As such the complainant’s claim had not prescribed as he was only 18 years old when the complaint was lodged. His claim would only prescribe on 10 November 2019, one year after he turns 21.

The PFA then went further, despite the Fund not having addressed the merits, to state that the trustees of the Fund did not conduct a proper investigation as envisaged by section 37C of the Act and failed to apply their minds when distributing death benefits. Therefore the decision to exclude the complainant was set aside and the trustees were ordered to re-exercise their discretion.

This case serves as a reminder to trustees of two things:

  1. The majority age will only be 18 years in instances where a decision was taken after 2007. Where decisions were taken before 2007 the majority age is 21 years.
  2. The discretion granted in terms of section 37C of the Act must be exercised with extreme caution and diligence to ensure that beneficiaries are not overlooked. Unwinding things up to 22 years later will be a challenge and cost the fund money.
 
Source: Norton Rose Fulbright South Africa Inc.
 
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