We recently had to deal with two interesting scenarios that no doubt occur regularly.

In the first case, a former pension fund member instructed us to pay his withdrawal benefit into an account that is held jointly by him and his wife who thus has unrestricted access to all funds in this account, including any pension fund moneys paid into the account.

In the second case, the employer of a deceased employee incurred a number of costs related to the funeral of the deceased employee and to transport deceased’s family members from SA to the funeral in Namibia. The employer entered into an agreement with the family members authorizing the fund to pay such portion of the death benefit directly to the employer, as the employer had borne in connection with the funeral.

Considering the stipulations of section 37 of the Pension Funds Act, the question must be asked whether such payments would contravene the Pension Funds Act?

Section 37A deals with a “…benefit, or a right to a benefit being reduced, transferred or otherwise ceded, or of being pledged or hypothecated, or be liable to be attached or subjected to  any form of execution under judgment or order of a court ….”. The section goes on to say that “…in the event of the member or beneficiary concerned attempting to transfer or otherwise cede, or to pledge or hypothecate such benefit or right, the fund concerned may withhold or suspend payment thereof …”.  

The desired payments must be evaluated against the provisions of section 37A. In this context Pensions World journal of June 2006 contained an interesting deliberation on the application of Section 37 A. This talks about two schools of thought, one being that the benefit must reach the member and it cites two cases that dwelled on this question. Whether a payment into a jointly held account or to the deceased’s employer in terms of an instruction by beneficiaries can be construed as having reached the member or the beneficiary is questionable, but certainly poses a risk to the fund that the fund needs to consider.

Section 37A(1) permits a fund to withhold or suspend payment of benefits should any attempt be made to transfer, cede, pledge or hypothecate the member's benefits. If our interpretation of the Act is correct, the fund is permitted to withhold or suspend payment of the benefit, which these instructions by the member and the beneficiaries of the death benefit may entail.

Before simply following the instructions of a former fund member or of the beneficiaries of a death benefit that may be in contravention of the Pension Funds Act and more specifically with regard to Section 37A(1), the trustees should consider obtaining a legal opinion in this regard although a legal opinion is also only an opinion, unless it relies on decided legal precedent that leaves no room for any interpretation.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.