Chasing Away the Ghost in Death Benefi ts: A Closer Look at Section 37C of the Pension Funds Act 24 of 1956

• Jurisdiction: South Africa
• Author: Tukishi Manamela
• Citation: (2005) 17 SA Merc LJ 276
• Date: 16 August 2019
• Published date: 16 August 2019
• Pages: 276-294

Chasing Away the Ghost in Death Benef‌i ts:

A Closer Look at Section 37C of the Pension

Funds Act 24 of 1956

TUKISHI MANAMELA*

University of South Africa

1 Introduction

There are various ways in which people provide for their families’ f‌i nancial

security in the event of unemployment or death. Those who are employed join

social insurance schemes and, for example, become members of a pension or

provident fund.1

Pension funds are formed and administered in terms of the Pension Funds

Act 24 of 1956. The benef‌i ts that are payable, as well as other regulatory

matters, are determined by the rules made for each fund. Pension funds which

also provide for survivor’s benef‌i ts are intended to provide a form of benef‌i t to

the members when they retire or to compensate the survivors for the permanent

loss of economic support as a result of the death of the breadwinner.2 However,

it is important to note that death benef‌i ts payable after the death of a member

of the fund do not fall into the estate of the deceased member, but are to be

distributed in terms of s 37C of the Pension Funds Act.3

Section 37C provides as follows:

‘37C(1) Notwithstanding anything to the contrary contained in any law or in the rules of a

registered fund, any benef‌i t payable by such a fund upon the death of a member, shall ... not

form part of the assets in the estate of such a member, but shall be dealt with, in the following

manner:

(a) If the fund within twelve months of the death of the member becomes aware of or traces

a dependant or dependants of the member, the benef‌i t shall be paid to such dependant or,

as may be deemed equitable by the board, to one of such dependants or in proportions to

some of or all such dependants.

(b) If the fund does not become aware of or cannot trace any dependant of the member within

twelve months of the death of the member, and the member has designated in writing to

the fund a nominee who is not a dependant of the member, to receive the benef‌i t or such

* BProc LLB (Unin) LLM (Unisa). Associate Professor in the Department of Mercantile Law, School

of Law, University of South Africa.

1 See generally MP Olivier, MC Okpalupa, N Smith & M Thompson (eds) Social Security Law

General Principles (1999) (‘Olivier et al’) at 157; EML Strydom, PAK le Roux, AA Landman,

M Christianson, OC Dupper, P Myburgh, C Garbers, A Basson & F Barker Essential Social Security Law

(2001) (‘Strydom et al’) at 34; MP Olivier, N Smit & ER Kalula (eds) Social Security: A Legal Analysis

(2003) (‘Olivier et al SS’) at 301-2.

2 See generally TWC & Others v Rentokil Pension Fund & Another PFA/KZN/129/98, (unreported,

available at ftp://ftp.fsb.co.za/public/pfa/chapman.htm, visited on 11 May 2005); Van der Merwe &

Others v The Southern Life Association Ltd & Another 2000 BPLR 321 (PFA); GD Dobie NO v National

Technikon Retirement Pension Fund PFA/KZN/207/99/AS (unreported, available at ftp://ftp.fsb.co.za/

public/pfa/dobie.htm, visited on 11 May 2005). See also Olivier et al op cit note 1 at 157; Olivier et al SS

op cit note 1 at 308.

3 Section 37C is part of a group of sections intended to protect pension benef‌i ts. Other sections that

serve this purpose are ss 37A and 37B of the Pension Funds Act. See also Strydom et al op cit note 1 at

34-8; Olivier et al SS op cit note 1 at 307-8.

276

(2005) 17 SA Merc LJ 276

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SECTION 37C OF THE PENSION FUNDS ACT 277

portion of the pension as is specif‌i ed by a member in writing to the fund the benef‌i t or such

portion ... shall be paid to such nominee ....

(bA) If a member has a dependant and the member has also designated in writing to the fund a

nominee to receive the benef‌i t or such portion of the benef‌i t as is specif‌i ed by the member

in writing to the fund the fund shall within twelve months of the death of such member pay

the benef‌i t or such portion thereof to such dependant or nominee in such proportions as the

board may deem equitable: Provided that this paragraph shall only apply to the designation

of a nominee made on or after 30 June 1989 ....

(c) If the fund does not become aware of or cannot trace any dependant of the member within

twelve months of the death of the member and if the member has not designated a nominee

or if the member has designated a nominee to receive a portion of the benef‌i t in writing to

the fund, the benef‌i t or the remaining portion of the benef‌i t after payment to the designated

nominee, shall be paid into the estate of the member ....’

Section 37C establishes a compulsory scheme in terms of which death

benef‌i ts payable after the death of a member of the fund have to be distributed

to the deceased’s dependants. The section expressly restricts the deceased

member’s freedom of testation in respect of the benef‌i ts in that the benef‌i ts

cannot form part of his or her estate.4 It gives the trustees discretionary powers

to distribute the death benef‌i ts in terms of what they deem equitable.5 However,

the section is not without problems.

Firstly, the trustees have to determine whether the deceased had any

dependants6 and it has in some instances proven diff‌i cult for trustees to

determine who qualif‌i es and who does not qualify as a dependant,7 and in

4 See generally Mashazi v African Products Retirement Benef‌i t Provident Fund & Another 2003

(1) SA 629 (W) at 632H-633A; Kaplan & Another NNO v Professional & Executive Retirement Fund

& Others, Kaplan & Another NNO v VIP Retirement Annuity Fund & Others 1998 (4) SA 1234 (W) at

1237E-F; Kaplan & Another NO v Professional & Executive Retirement Fund & Others 1999 (3) SA

798 (SCA) at 803A-B; J Malanga v Group Five Multi Benef‌i t Retirement Fund PFA/GA/1214/00 at 5,

(unreported, available at ftp://ftp.fsb.co.za/public/pfa/malangajs.pdf, visited on 11 May 2005).

5 See, generally, Howard Sher ‘Pension Funds’ (1997) 5 Juta’s Business Law 59-61; PAK le Roux

‘Decisions in Terms of s 37C’ (1999) 8 Contemporary Labour Law 99-100; Issac Moledi ‘Taking the

Mystery out of Section 37C’ 19 Aug 2003 Sowetan at 20.

6 Section 1 of the Pension Funds Act sv ‘dependant’. In terms of the section both ‘legal’ and ‘factual’

dependants qualify to be benef‌i ciaries of the death benef‌i ts in terms of s 37C (see par 4 below).

7 The following examples show how diff‌i cult it may be for trustees to determine who should and

who should not receive death benef‌i ts: In PP Mabetlela & Another v Progress Provident Fund PFA/

NP/881/02/CN, (unreported, available at ftp://ftp.fsb.co.za/public/pfa/Mabet.pdf, visited on 11 May

2005), the fund granted a woman who stayed with the deceased as husband and wife a certain percentage

of the deceased’s death benef‌i ts, even though there was a dispute regarding whether or not lobola had

been paid for her, so as to make her the deceased’s customary wife. The decision of the board was upheld

by the Adjudicator because evidence proved that lobola was paid for her. In KS Moshidi v Kimberly-Clark

Provident Fund & Another PFA/NP/294/02/CN (unreported, available at ftp://ftp.fsb.co.za/public/pfa/

Moshidi.pdf, visited on 11 May 2005) at 6-7, it was decided that a wife who was periodically visited by

her customary-law husband was not a dependant of her deceased husband because he had spent more

time with his new customary wife (ie, the woman with whom he had had a long-standing relationship

of co-habitation). In R Mtshayi v Liberty Life & Others PFA/WE/3731/01SA (unreported, available at

ftp://ftp.fsb.co.za/public/pfa/Mtshayi pdf, visited on 11 May 2005), the Adjudicator turned down the

decision of the board where it excluded the deceased’s legal wife when making distribution of death

benef‌i ts on the basis that the deceased had told his employer ‘on his deathbed to exclude her’ (see in par

12 at 4). The Adjudicator stated that a legal wife of the deceased member is a legal dependant in terms

of s 1 of the Act, whether or not she was nominated, and whether or not she was factually dependant on

the member (see in par 22 at 9). It was held in Welens v Unsgaard Pension Fund (2002) 12 BPLR 4214

(PFA) that the mother of the deceased who was not a dependant of the deceased at the time of his death

was entitled to receive death benef‌i ts because she would have become dependant on him at a future date.

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