Does your husband’s Nyatsi qualify to be a beneficiary in terms of Section 37C of the Pension Fund Act?

02 April 2024 ,  Lerato Mashego 121

The long and short form is that life is unpredictable, and we can only hope that the worst does not happen to us. The reality is you may try as hard as possible to be prepared for everything. But it is inevitable that we will never be prepared for everything life throws at us. Nobody goes into marriage thinking it will end with unwelcomed surprises at the death of their spouse. Now, imagine a situation where a husband passes away, and his girlfriend (nyatsi) claims a share of his pension fund. Despite the existence or non- existence of a will, the deceased pension fund member is unable to bequeath the pension benefit to any of his heirs in his will. Meaning that the benefit may be awarded to any beneficiaries who were dependant on the member prior to his death. 

Hence it is of paramount importance that I refer you to Section 37C of the Pension Funds Act 24 of 1956. This section governs the distribution and payment of lump sum benefits payable on the death of a member of a pension fund. Furthermore, this provision places a duty on the trustees of the fund to allocate and pay the benefit in a manner that it deems fair and equitable. Therefore, the duty of the trustees is to identify the dependants and nominees of the deceased member and effect an equitable distribution of the benefit amongst the said dependants and nominees.

Be that as it may, Section 37C must be read in tandem with section 1 of the Act. This section defines a beneficiary as a nominee of a member or a dependant who is entitled to a benefit, as provided for in the rules of the relevant fund. Moreover, the purpose of Section 37C was alluded to in Mashazi v African Products Retirement Benefit Fund 2003 (1) SA 629 (W), where the court highlighted that the purpose of this section is protect dependency, even over the clear wishes of the deceased. This section specifically restricts freedom of testation in order that no dependants are left without support. It further enjoins the trustees of the pension fund to exercise an equitable discretion, taking into account a number of factors.

Therefore, in simple terms a Nyatsi can be a beneficiary in terms of Section 37C of the Act. Provided that she satisfies the definition of a beneficiary in terms of Section 1 of the Act. This was seen in the case of Sidimela and others v Marage & Others [2017] ZAGPPHC 276, where the court averred that the Applicant in the Appeal Court was entitled to her 50% of the pension fund benefit by virtue of being married to the deceased in community of property, but she cannot succeed with her application to disinherit the First Respondent of her share of the deceased 50% benefit. On grounds that the deceased has been living with the First Applicant after he left their marriage since the year 2002. Therefore, the trustees were correct with identifying that the First Respondent was indeed a beneficiary in terms of Section 37C of the Act.

Considering the above case, despite the fact that he had left his home and subsequently the marriage. To be a beneficiary, the trustees must establish whether when making an equitable distribution, the age of the dependants, the relationship with the deceased, the extent of the dependency, the wishes of the deceased placed either in the nomination or his last will, and financial affairs of the dependants including their future earning capacity potential. Therefore, it is imperative that the trustees should always account for these factors before distribution is made on the deceased member of the Pension Fund, because failure to correctly distribute the share may be prejudicial to an interested party.