The award of the retirement
fund death benefit is a controversial, complicated and slow process, that is
not well-understood by fund members and their dependents. The inevitable fear,
frustration and financial hardship that follow from long payment delays add to
the emotional strain of losing a loved one.
Below we explain how the
process works, the issues trustees must take into account and what you, as the
fund member, can do to expedite the process.
Process regulated by
Pension Funds Act
The payment of death
benefits from a Pension, Provident or Retirement annuity fund is regulated by
section 37C of the Pension Funds Act 24 of 1956. When a member dies and a
claim is made, the trustees of the fund must follow the requirements as set out
in the Act and cannot merely follow the beneficiary nomination which was made
by the member.
In determining who will
receive the benefit on the death of a member, the trustees are granted 12
months from the date of death to search for any dependents of the deceased
member. This must be done despite the existence of a beneficiary nomination.
The trustees have the final
say with regards to the distribution of the death benefit; however, they must
ensure that there is equitable distribution.
The beneficiary nomination
acts merely as a guideline to the trustees as to the wishes of the member and
will be taken into consideration when investigating the claim.
The trustees need to take the following matters into consideration:
- The age of the parties
- Their relationship with the
- The extent of their
dependency on the deceased, if any (did the deceased provide any money to them)
- The financial status and
affairs of the dependents (employment, capability of managing money)
- The future earning
potential of the dependents (are they likely to find employment if unemployed;
are they students; are they disabled etc.)
In addition, the trustees
also need to take into consideration:
- Any parties the deceased
had a legal duty to support (spouses, children, parents, grandparents, unborn
- Factual dependents (common
law spouses, same-sex partners, step children, foster children)
- Customary law spouses
- Major children who the
deceased had a legal responsibility to support
The way that the death
benefit is paid is also regulated by section 37C and currently allows for the
- Payment directly to the
dependent or nominee
- Payment to a trust
- Payment to a guardian or
- Payment to a beneficiary
When a death benefit is
payable to a minor then the trustees may only pay the benefit to the guardian
of the minor or to a beneficiary fund. As a guardian has the right in terms of
law to administer the financial affairs of the minor, the trustees cannot,
without applying their minds to the facts, pay the benefit into a beneficiary
fund and not the guardian.
Should the trustees not
find a dependent within the 12 month period following the death of the member
and a beneficiary was nominated by the member then the trustees may pay the
benefit to the nominated beneficiary. If no beneficiary was nominated then the
benefit will be paid into the deceased’s estate.
The most effective way to
speed up the process is to ensure that, as a fund member, your beneficiary
nomination form is kept up to date all the time and lists ALL your financial dependents.
This helps the Fund trustees greatly in their investigation, and therefore
minimises the delay in settling the claim.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)