A recent decision by the Financial Services Tribunal (FST), in which it upheld the Pension Funds Adjudicator’s refusal to award a retirement fund death benefit to a surviving spouse, has brought renewed focus to Section 37C of the Pension Funds Act – a provision many South Africans misunderstand or simply aren’t aware of.
While it may seem intuitive to assume that a spouse would automatically receive some or all of the retirement fund death benefit, Section 37C mandates something quite different. This section is designed to protect the rights of dependants and ensure that retirement fund benefits are distributed equitably, rather than strictly according to a nomination form.
Section 37C of the Pension Funds Act gives trustees of a retirement fund the responsibility to:
- Identify all legal and factual dependants of the deceased member;
- Consider the retirement fund member’s nominated beneficiaries;
- Conduct a fair and equitable distribution of the death benefit among all dependants and nominees.
Ultimately, the final decision rests with the fund’s board of trustees, who must act independently and impartially, taking into account the financial needs, dependency status, and circumstances of all parties involved.
Real-Life Case: FST ruling in the Mate case
This case demonstrates how retirement fund trustees apply Section 37C:
- The retirement fund member, Mr Mate, was still legally married to Mrs Mate, with whom he had two children.
- At the time of his death, however, Mr Mate had been living with Ms Dameni for over 15 years. She was unemployed, over 60 years old, and entirely financially dependent on him.
- Mrs Mate claimed 50% of her late husband’s death benefits, asserting that she and the children were still financially dependent on his estate.
The trustees ultimately allocated 65% of the death benefit to Ms Dameni and the remaining portion to the children. Mrs Mate received nothing. She challenged the decision, first through the Pension Funds Adjudicator and then the Financial Services Tribunal (FST), but both bodies upheld the trustees’ decision. The Tribunal confirmed that the trustees had acted within their legal obligations under Section 37C by prioritising financial dependency over legal marital status.
A Complex Balancing Act for Trustees
This outcome may surprise many. However, it highlights the critical fact that trustees are not bound by the member’s beneficiary nomination or even legal marital status. Instead, they must act in line with the principles of equity, taking care to prioritise vulnerable or financially dependent individuals including minor children, life partners, elderly parents or other financially dependent relatives.
In the absence of clear evidence of financial dependence, even a legally married spouse may not receive a benefit under Section 37C.
What Can Retirement Fund Members and Families Do?
If you want to ensure your loved ones are protected and your intentions are known, take the following steps:
- Update your retirement fund nomination forms regularly – especially after life changes like marriage, divorce, or the birth of a child.
- Have open conversations with your family and your financial planner – clarity helps prevent future disputes.
- Understand that your beneficiary nomination is not binding – it serves as a primary guidance, but the trustees have the final say.
- Consult a Certified Financial Planner® – particularly if you have a blended family or other complex circumstances that could create uncertainty.
Let’s Review Your Estate and Retirement Planning
At Centillion Wealth, we work with clients to navigate the legal, financial, and personal complexities of estate and retirement planning. This recent case is a strong reminder that retirement fund death benefits are not automatically governed by a beneficiary nomination form and never by a Will – they are guided by law, dependency, and fairness.
Whether you’re supporting a blended family, have dependants outside of your marriage, or want to ensure your legacy is distributed as you intend, we are here to help you make informed, legally sound decisions.
Contact us today to review your retirement fund nominations and estate planning strategy. Let’s ensure your family is protected and your wishes are respected.