ANY PERSON WHOM THE DECEASED MAINTAINED WHILE THEY LIVED WILL BE A BENEFICIARY OF THE DECEASED’S ESTATE IN TERMS OF SECTION 37C OF THE PENSION FUNDS ACT, 24 OF 1956

Section 37C of the Pension Funds Act, 24 of 1956 (“the Act”), has come under much scrutiny in recent years, because of the sometimes unexpected results of its implementation, particularly pertaining to the Pension Fund Trustee’s discretion in the execution of their duties distributing deceased members’ death benefits.

Section 37C regulates the distribution of death benefits, with its purpose to ensure that the deceased member’s financial dependants and/or nominees are not left destitute following the member’s death. Therein lies the rub, the ‘’and/or’’ as the benefit is distributed to dependants whether the deceased member had a legal obligation to maintain them or not. This means that any person whom the deceased maintained while he lived will be considered as a beneficiary, whether the person was “nominated’’ by the deceased member or not. This limits  freedom of testation, as the Board of Trustees can exercise discretion in the distribution of the benefit in what they deem fair and equitable in the circumstances, meaning that they are not bound by the member’s will or beneficiary nominations. Instead, a duty exists for the Board of Trustees to conduct investigations to determine and trace all the dependants of the deceased.

The Pension Fund Trustees exercise their duties as imposed by section 37C which gives them the discretion, albeit not unduly fettered discretion, to:

  1. Identify and trace ‘’dependants’’ (as defined in section 1 of the Act)[1]and those persons, if any, who have been nominated by the deceased member;
  2. Make benefit allocations on a fair and equitable basis; and
  3. Determine an appropriate mode of payment of the death benefit.

The above was confirmed in Mashazi v Africa Products Retirement Provident Fund[2] as well as in Berge v Alexander Forbes Retirement Fund (pension section) and Another[3]amongst other cases, which scrutinised the Trustees exercise of their powers which should be exercised having considered what the court directed in Sithole v ICS Provident Fund and Another[4], being:

  • the extent of dependency;
  • the ages of the beneficiaries;
  • the relationship with the deceased;
  • the amount available for distribution;
  • the financial status of each beneficiary, including the future earning capacity of each beneficiary; and
  • the wishes of the deceased.

Other notable traits of section 37C are:

  1. Death benefits do not form part of the member’s deceased estate, with limited exceptions set out in the section, instead the benefits will be placed under the control of the relevant fund.
  2. Death benefits are not subject to the law of marriages, which means the benefit does not form part of the joint estate where the parties are married in community of property.
  3. The law of intestate succession does not apply in situations where the member died without a valid will.

As is obvious from the above, the deceased member’s nominated beneficiaries are not any more than a ‘wish list’ with which there exists no legal requirement to strictly comply. A member should always have this in mind, not only when completing a Nominated Beneficiaries Form, but also when providing for anyone, including those that he/she has no legal obligation to provide for, more so when he/she wishes for the latter not to benefit from his/her death benefits.

Author: Xoliswa Mtulu-Dotwana

[1] The word “dependant” in the Act was defined as follows:

Dependant, in relation to a member, means-

  • A person in respect of whom the member is legally liable for maintenance
  • A person in respect of whom the member is not legally liable for maintenance, if such a person-
  • Was, in the opinion of the Board, upon the death of the member in fact dependent on the member for maintenance;
  • Is the spouse of the member;
  • Is a child of the member, including a posthumous child, an adopted child and an illegitimate child;

(iv)         A person in respect of whom the member would have become legally liable for maintenance, had the member not died

[2] Mashazi v Africa Products Retirement Provident Fund [2002] 8 BPLR 3703 (W) at 3705-3706

[3] Berge v Alexander Forbes Retirement Fund (Pension Section) [2006] ZAGPHC 241

[4] Sithole v ICS Provident Fund 2000 4 BPLR 430 (PFA)

LEAVE REPLY

Your email address will not be published. Required fields are marked *