Lize de la Harpe, Senior Legal Advisor at Sanlam

Section 37C of the Pension Funds Act, 1956 (the Act), which regulates the payment of fund death benefits, imposes several duties on the board of trustees, especially when it comes to conducting proper investigations to identify and trace dependents.

The Supreme Court of Appeal (SCA) on 28 May 2026 dismissed an appeal against a judgment of the High Court dealing with the interpretation of the 12-month period referred to in section 37C.

The Pension Funds Act, 1956

Before we can unpack this judgment, we first need to recap on the object of section 37C.

In essence, section 37C of the Act imposes three duties on the Board of trustees, namely to:

1. Identify and trace “dependants” as defined in section 1 of the Act and those persons, if any, who have been nominated by the deceased member,
2. Make benefit allocations on a fair and equitable basis, and lastly
3. Determine an appropriate mode of payment of the death benefit.

The section goes on to stipulate time frames for the payment of the death benefit, depending on the specific scenario, for example where there are dependents and no nominees, or no dependents and only a nominees, etc.

In essence, it affords the trustees 12 months within which to identify and trace dependents and/or nominees. The duty to pay is thus linked to when this 12-month period starts to run. There is a common misconception that the fund’s duty to pay is always contingent on the expiry of this 12-month time period. This is not correct – the duty to pay is not dependent on the expiry of the 12-month period, but rather on whether the Board is satisfied that it has investigated and considered the matter with due diligence and is in a position to make an equitable allocation. Conversely, section 37C does not prohibit distribution of death benefits within 12 months.

South African Retirement Annuity Fund v Pension Funds Adjudicator and Another (1163/2024) [2026] ZASCA 79 (28 May 2026)

Mr Viljoen, a member of the South African Retirement Annuity Fund (the Fund) died in December 2019, at which point a fund death benefit became payable in terms of section 37C. The member had not nominated a beneficiary to receive the death benefit and died intestate. At the time the Fund was informed of his death, no executor had been appointed to his estate, which was estimated to be below R250 000. The Fund only learned about the death of the member for the first time on 28 March 2022, when the Mrs Viljoen (his wife) submitted a claim to it.

Mrs Viljoen, who relied solely on a state old-age grant, did not know about her husband’s retirement annuity benefit. She was only made aware of this benefit (by her broker) in 2022, at which point she then lodged a claim to the Fund. The Fund refused her claim and instead paid the benefit to the deceased estate.

The Fund held the view that section 37C mandates it to investigate and trace all the deceased member’s dependants and to pay them the death benefit due to them; in this instance, it did not attempt to trace them. The reason for not doing so is that in its view that duty only arises if the Fund learns of the death within 12 months of the death of a member. Since the Fund only learned of the death after the 12 months had lapsed, it decided not to investigate, but to rather pay the death benefit into the member’s deceased estate.

Aggrieved by this, Mrs. Viljoen lodged a complaint to the Pension Fund Adjudicator (PFA). After considering the facts, the PFA set aside the Fund’s decision and ordered it to immediately commence with an investigation in terms of section 37C. The Fund lodged an application to the High Court to set aside the PFA’s determination.

The High Court rejected the Fund’s interpretation of section 37C and held that a logical interpretation of the section 37C with regards to the 12-month period must be applied, i.e.: that the period starts to run once the Fund becomes aware of the members death. It accordingly upheld the determination of the PFA, and dismissed the application with costs.

The Fund then lodged an appeal to the Supreme Court of Appeal (SCA), where it argued as follows:

• That a the proper interpretation of section 37C(1) is that the 12 month period within which to identify and trace dependents commences on the date of the member’s death.

• There is no obligation on the Fund to trace the dependants or nominees of a member if the Fund is made aware of the death of the member after a period of 12 months from the date of death of the member. In such instance, the benefit must be paid to the deceased estate.

• Lastly, it submitted that it was never the intention of the legislature that the creditors should wait indefinitely, whilst the Fund is trying to trace the dependants or nominees. Consequently, the creditors should be preferred over the dependants or nominees.

Mrs Viljoen in turn argued that the trigger for section 37C(1) arises only when the Fund learns of a member’s death. Furthermore, the 12-month period stated in section 37C(1) serves as a guide, not a guillotine – trustees are not bound by a member’s date of death. The object of the Act is to make provision for the member on retirement, or to provide for the social security of his or her dependants and nominees should the member die before retirement. The payment of the pension benefit to deceased members’ estates as a default would violate the rights of the dependants and nominees to equality and social security.

In essence, the appeal concerned the interpretation of the phrase “within twelve months of the death of the member” as referred to in section 37C of the Act, the question being whether section 37C permitted the Fund to pay the death benefit to the deceased’s estate before establishing the identity of the deceased’s dependants.

The SCA found that the phrase “within twelve months of the death” is linked to a fund becoming aware of the member’s death. Put differently, it’s knowledge of the death of the member that triggers the identification and verification of the dependency process.

Applying the aforesaid to the facts, it was common cause that the Fund only became aware of Mr Viljoen’s death 2 years after his demise. However, to achieve the objective of the Act, the Fund has to identify the dependants, make an equitable distribution and choose a method of payment to them. The Fund cannot carry out these objectives without identifying the dependants. The Fund’s interpretation of section 37C treats the payment to the estate as the default position – which is contrary to the objective of this section and would lead to absurdity. Payment to the deceased estate can only be made once all the statutory avenues for tracing and identifying dependants and nominees have been exhausted. Under section 37C(1)(c), if no dependants or nominees are found, the benefit will be paid to the estate.

With regards to the Fund’s argument re creditors, the SCA held that, considering the social purpose of section 37C, it is indisputable that this provision prioritises the financial security of the deceased members’ dependants. Furthermore, section 37B of the Act (which provides that if a member’s estate is sequestrated, their pension fund interest does not form part of the insolvent estate) operates alongside section 37C, which is also in line with the purpose of the Act.

The SCA accordingly concluded that the High Court correctly dismissed the application.

Conclusion

The Viljoen case again highlights the importance of a proper understanding of section 37C and the duties it imposes on the board of trustees. Failure to do so not only harms dependents who rely on these funds, but also amounts to maladministration of the fund.

ENDS