Section 37C(1) of the Act provides for two scenarios:

1. If the fund, within 12 months of the death of the member, becomes aware of or traces a dependant(s), the benefit must be paid to such dependant or, as determined by the fund, to one or more dependants.
2. If the fund does not become aware of or cannot trace any dependant within 12 months of the death of the member, and the member has designated a nominee who is not a dependant, the benefit (or a portion thereof) must be paid to such nominee.

The central question before the SCA was whether a pension fund is relieved of its obligation to trace and pay dependants after the 12-month period stipulated in section 37C(1) has lapsed from the date of the member’s death.

The SCA rejected such a restrictive interpretation, holding that the 12-month period serves as a guideline for the administration of death benefits, rather than an absolute cut-off that extinguishes the rights of dependants.

Facts

Mr Marius Viljoen passed away on 26 December 2019. He was a member of the South African Retirement Annuity Fund (Fund), underwritten by Old Mutual Life Assurance Company (South Africa) Limited, and had a retirement annuity benefit of R52,120.53. He had not nominated a beneficiary and died intestate. As the value of his estate fell below the statutory threshold of R250,000, no executor was appointed.

Mr Viljoen was survived by his wife, Mrs Sophia Viljoen, who relied solely on a state-funded old-age social relief grant. She was unaware of the existence of the retirement annuity benefit until it was brought to her attention by a broker. On 28 March 2022 – approximately two years and three months after Mr Viljoen’s death – she submitted a claim to the Fund with the broker’s assistance.

The Fund repudiated Mrs Viljoen’s claim on the basis that no dependant had been identified within 12 months of Mr Viljoen’s death. On 18 July 2022, it resolved to pay the death benefit into Mr Viljoen’s estate, despite the estate not having been reported to the relevant Master of the High Court.

Mrs Viljoen lodged a complaint with the Pension Funds Adjudicator, which on 23 June 2023 set aside the Fund’s decision and directed it to investigate and determine the deceased’s beneficiaries. The Fund challenged this determination in the High Court, which dismissed its application and confirmed the adjudicator’s order.

The SCA’s decision and key principles

The SCA dismissed the appeal. The key principles emerging from the judgment are as follows:

The 12-month period is not an absolute cut-off

The process of tracing and determining dependants can only commence once the Fund becomes aware of the member’s death. It is the Fund’s knowledge of the death – not the date of death itself – that triggers the identification and verification process. The 12-month period was intended as a guideline to promote administrative efficiency, rather than being a rigid deadline.

The Fund bears a statutory duty to trace dependants

Section 37C of the Act imposes a legal duty on the Fund to identify the dependants and nominees of a deceased member. Once identified, the Fund must effect an equitable distribution of the death benefit. This process necessarily involves tracing dependants, which is a precondition to identification – not a discretionary exercise. Accordingly, even where the Fund becomes aware of the death more than 12 months later, nothing precludes it from investigating and tracing dependants.

Payment to the estate is a last resort, not the default

Section 37C(1) makes clear that death benefits do not form part of the deceased estate. Payment to the estate under section 37C(1)(c) is permissible only once all statutory avenues for tracing and identifying dependants and nominees have been exhausted. The Fund’s interpretation – which treated payment to the estate as the default position – was inconsistent with the purpose of the Act.

The definition of “unclaimed benefits” reinforces a flexible timeframe

The definition of “unclaimed benefits” in section 1 of the Act refers to a death benefit not paid within 24 months from the date on which the Fund becomes aware of the death of a member, or within such longer period as may be reasonably justified by the board. The SCA relied on this to confirm that funds are afforded a reasonable period to identify and determine dependants before transferring benefits to an unclaimed benefit fund.

Key takeaways for pension funds and practitioners

This judgment sends a clear signal to pension funds and retirement annuity providers:

• The 12-month period in section 37C(1) is a guideline aimed at promoting administrative efficiency, not a statutory deadline that extinguishes the rights of dependants.
• Funds must not default to paying death benefits into the estate merely because 12 months have elapsed from the date of death.
• Funds are required to exhaust all avenues for tracing and identifying dependants before resorting to payment to the estate.

Ultimately, the judgment reinforces the foundational principle that section 37C constitutes social security legislation designed to protect the dependants of deceased members, and must be interpreted and applied in a manner that advances that purpose.