Lize de la Harpe, Senior Legal Advisor at Sanlam

Introduction

Section 37C of the Pension Funds Act, 1956 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 Pension Funds Adjudicator recently upheld the distribution of a fund death benefit to a former housekeeper to the exclusion of the nominee’s deceased estate. Let’s unpack.

The Pension Funds Act, 1956

Before delving into the detail of this determination, we first need to recap on the object of section 37C.

Section 37C of the Pension Funds Act regulates the payment of fund death benefits and its main purpose is to ensure that those persons who were dependant on the deceased member are not left destitute after his/her death, regardless of whether or not the member was legally obligated to maintain them.

For this very reason, section 1 of the act defines the concept of “dependent” very widely. Section 1 distinguishes between three categories of dependents –

• Legal dependents – persons in respect of whom the member owed a legal duty to support. Legal dependents do not have to prove that the member in fact maintained them – all they need to prove is that they qualify as a legal dependent as defined.

• Factual dependents – persons to whom the member owed no legal duty of financial support but who nevertheless depended on the member financially. There are two essential requirements that have to be met for a person to be regarded as a factual dependant, being a need on the part of the claimant and the regular provision of financial support by the member.

• Future dependents – those persons whom the member did not financially maintain at the point of his death, but whom he would have maintained in future, had he not died. To fall within this category, one would have to prove that the member would have become liable to maintain you, had he not died.

In essence, section 37C 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 CC recently confirmed in the Mutsila judgement that dependency must be determined at the time of the member’s death. Once an individual is identified as a dependant, whether legal or factual, that status as a dependant does not change. If, however, at the distribution stage, there are changed circumstances that alter the needs of the dependant – for instance, if they inherited a large sum of money that rendered them no longer reliant on the deceased member or they passed away – the fund may have regard to these circumstances when determining an equitable distribution.

Very importantly, the mere fact that someone falls within the definition of “dependant” only entitles him/her to be considered by the Board when making the benefit allocation decision. Qualifying as a dependent in terms of the definition does not mean he/she automatically qualifies to share in the death benefit payable.

Once the dependents have been identified, the next step is then to make a benefit allocation on a fair and equitable basis, taking into account all relevant factors and ignoring irrelevant ones.  Lastly, once an allocation is made, the Board must 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.

HC Nel v Allan Gray Retirement Annuity Fund and BJ Tu (3 June 2026)

Ms Tu worked as a housekeeper for the deceased, Mrs Cooke and her husband, Mr Cooke, until her retirement. After retiring, the deceased continued to pay Ms Tu R3,500 per month for groceries and living expenses.

The deceased member passed away on 21 September 2024, and her husband died less than two weeks later. Both the deceased and her husband bequeathed R200,000 each to Ms Tu from their respective estates. The complainant, as executrix of the deceased’s estate, continued the monthly payments to Ms Tu.

At the death of Mrs Cooke, a fund death benefit became payable in terms of section 37C in the amount of roughly R1,89m. The deceased and her husband had no children, and the deceased had nominated her husband as the sole beneficiary.

By the time the Board had concluded its investigation, Mr Cooke had also passed away. As such, the fund allocated 100% of the death benefit to Ms Tu in terms of section 37(1)(a) of the act as the only dependent.

The crux of the complaint was as follows – the executrix submitted that the fund erred in allocating the entire benefit to Ms Tu in terms of section 37C(1)(a) as this section only applies where there is no nominee. Mr Cooke was the designated nominee of the retirement annuity. The bequests of R200 000.00 each from their respective deceased estates was specifically for the purpose of replacing the monthly stipend to ensure Ms Tu was not left without support. Ms Tu, having received the inheritance, is therefore no longer dependent on the deceased. The complainant thus submitted that the benefit should be distributed in terms of section 37C(1)(b) of the Act, being where there is only a nominee and no dependents.

The complainant therefore asked the Adjudicator to order an equitable distribution of the benefit between Mr Cooke and Ms Tu.

Turning to the facts, the Adjudicator agreed with the fund treating Ms Tu as a factual dependent. Ms Tu needed maintenance and the deceased regularly provided such maintenance.

With regards to Mr Cooke, the Adjudicator confirmed that as the spouse of the member he qualified as a legal dependent. Although the act does not define a “nominee” for purposes of section 37C, it is clear from the act that a nominee is a person who does not qualify as a dependant. The fund was therefore correct to treat Mr Cooke as a dependant rather than as a nominee.

The Adjudicator, however, disagreed with the fund’s finding that Ms Tu was the only dependent. Referring to the Mutsila case, the Adjudicator held that the death of Mr Cooke prior to the fund’s allocation did not affect his status as a dependant. The fund therefore erred in its finding that Ms Tau was the only dependent and simply allocating 100% to her on that basis alone. Having said that, a right to a specific portion of the death benefit did not vest in Mr Cooke upon the death of the deceased. What arose was a right to be considered in the equitable allocation contemplated by section 37C. Once the relevant post-death circumstances are taken into account, including Mr Cooke’s death before the allocation decision and Ms Tu’s position as the surviving dependant, the equitable result on the facts of this matter should be that no portion of the benefit falls to be allocated to Mr Cooke, and that the full benefit be allocated to Ms Tu.

The Adjudicator accordingly replaced the Board’s decision on the aforesaid basis.

Conclusion

The media coverage on this matter has focussed very little (if at all) on what I consider to be the crux of the matter, which is the fact that a nominee/dependent’s deceased estate is not entitled to a share in a fund death benefit where such nominee or dependent passes away before the fund has made an allocation.

Put differently: a right to a specific portion of the death benefit does not vest in such dependent or nominee upon the death of the deceased. What arises at the members death is no more than a right to be considered in the equitable allocation contemplated by section 37C.

ENDS