Section 37C of the Pension Funds Act 24 of 1956 governs the payment of pension benefits upon the death of a member. Section 37C places an obligation on the trustees of a pension fund to conduct a thorough investigation to determine the dependants of the deceased member, to decide on an equitable distribution and to decide on the most appropriate mode of payment of the benefit.
Who qualifies to be a dependant for the purposes of the Pension Funds Act?
Section 1(b) of the Pension Funds Act defines a "dependant" broadly to include persons in respect of whom the deceased was not legally liable for maintenance. Therefore, the purpose of the legislature in defining the word "dependant" was to broaden the category of persons entitled to share in death benefits.
The above definition means that any person, irrespective of whether they were related to the member, would qualify as a dependant for the purposes of the Pension Funds Act and will be entitled to a share of the member's pension provided that the individual concerned can establish that he or she depended on the member financially.
Section 37C overrides the freedom of testation of the deceased in that persons who are not nominated as beneficiaries by the deceased member and/or who are not included in the deceased member's will, may also be considered by the trustees as dependants. Having said that, the member's beneficiary forms will assist the pension fund to trace the member's dependants and will be a factor when the trustees determine an equitable distribution.
What are the trustees' obligations upon the death the death of the member?
Section 37C of the Act provides for the following procedure:
- the pension fund must within 12 months of the death of a member pay the benefit to the member's dependants of whom they are aware of or traced;
- if the pension fund does not trace or become aware of any dependants, it shall pay the benefit to the member's nominees or nominated beneficiaries in the proportion specified by the member in writing;
- the pension fund has a discretion to pay benefits to any dependants or nominees in proportions;
- if no dependant can be traced, the pension fund will pay the pension benefit to the deceased member's estate; and
- interim payments may be made to minor dependants or minor nominees provided that interest is added to the balance owing to such dependant or nominee.
The trustees of a pension fund are obliged to conduct an investigation to determine how many dependants the deceased member has. It is only after an investigation has been conducted that the trustees may pay the pension benefit to the dependants in proportions decided by the trustees in their discretion.
To determine whether or not a fund complies with its duties in terms of section 37C(1)(a), the question is whether it took all reasonable steps to trace dependants. In the case of CALA Dairies CC v Orion Money Purchase Provident Fund and Another (1)  11 BPLR 2676 (PFA), the pension fund argued that since the deceased failed to provide the fund with any information regarding his dependants, that that somehow reduced the obligation on the fund to trace dependants. The Pension Funds Adjudicator held that the reverse is true. The fact that the deceased did not provide information regarding his dependants by nominating beneficiaries placed a greater duty on the trustees to proceed cautiously and to undertake a comprehensive investigation. The duty is on the board to satisfy itself that all dependants have been traced.
The obligation on the trustees to investigate and trace all dependants cannot be overemphasised. If the trustees failed in this duty they can be deemed to have acted negligently.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.