The Section 37C of the Pension Funds Act governs the distribution and payment of lump sum benefits payable on the death of a member prior to retirement from either a pension or provident fund or pension and provident preservation fund or a retirement annuity fund. The Trustees of the Fund are the persons responsible to carry out this task. The death benefit does not form a part of your estate.

In spite of the fact that you may have nominated one or more persons as beneficiaries, the Trustees of the Fund must determine who your dependants are and who should receive the benefit. The intention of the legislature is that no dependants of members should be without financial support. Your beneficiary nomination is therefore merely a guideline to the trustees.

The Trustees are granted 12 months from the date of your death to search for and identify your dependants. They also have the final decision with regards to the distribution of your death benefit.

The duties of the Trustees are to identify the dependants and the nominees of the deceased, effect an equitable distribution and determine the mode of payment.

Who qualifies as dependants?

• Persons the deceased was legally liable to maintain, such as children, parents, and grandparents.
• Spouses, including permanent life partners, civil union partner, customary marriage or religious union partners.
• Factual dependants, such as same sex partners, step-children, foster-children, illegitimate children, adopted children, unborn children.

To whom can the payments be made?

• Payment directly to the nominee or dependent.
• Payment to a guardian or caregiver.
• Payment to a beneficiary fund.
• Payment to a trust.

As regards trusts, the Trustees of the Fund may no longer nominate a trust as the beneficiary of the benefits unless the trust is also nominated by either:

• the deceased member, or
• a major dependant or nominee; or
• a person recognized in law or appointed by a Court as the person responsible for managing the affairs or meeting the daily care needs of a minor dependant or nominee or a major dependant or nominee who is not able to manage his affairs or meet his daily care need; or
• a person recognised in law or appointed by a Court as the person responsible for managing the affairs or meeting the daily care needs of a dependant or nominee; or
• a Beneficiary Fund registered in terms of the Act.

What happens if no beneficiaries were nominated?

If the member left dependants, they will be paid.

If the member left no dependants the benefit will be paid to the member’s estate or the Guardian’s Fund.

In practice problems can arise where there are in fact multiple dependants and the member only nominated one dependant. In this instance, payment will be made to all the dependants in such proportions as may be deemed equitable by the trustees.

If a non-dependant is nominated as a beneficiary payment will only be made 12 months after the death of the member, since the trustees want to ensure that there are no dependants.

Where a non-dependant is nominated and there are other dependants, the trustees must pay the benefit to the dependant and/or the nominated beneficiary in such proportions as they deem equitable.

How benefits are awarded to minor children

• pay the legal guardian,
• pay the minor in instalments;
• place the benefit in trust,
• pay to a Beneficiary Fund.