Section 37C – Are you confident that your nominated beneficiary will receive your death benefit?

It is no secret that the legislation is often regarded as intricate and intimidating. The sheer volume of policies and acts, its staggering level of detail and constant amendments mean that even professional users often find the law incredibly complex, hard to understand and difficult to comply with. One particular Act that is crucial for our clients to be aware of is Section 37C of the Pension Funds Act. This Act governs the distribution of death benefits of all approved funds (i.e., Pension, Provident, Retirement Annuities and Preservation Funds). This means that even though you may have nominated one or more people as beneficiaries, the Fund's Trustees determine who your dependants are and who should receive the pay-out.

In theory, Section 37C makes sense as it helps ensure that no dependants of members go without financial support. However, in practice, it is a whole different story. Since it is the Fund Trustees' duty to consider all the dependants of the deceased, your beneficiary nomination only serves as a guideline to the trustees. In that case, who exactly do the trustees consider to be a dependant? The Act defines a dependant as a spouse, children, anyone proved to have been financially dependent on the member at the time of death, anyone entitled to maintenance, as well as any future dependents. This is where matters get a little complicated because anyone who can prove to be financially dependent on the deceased (be it a relative, friend, boy/girlfriend, mistress etc...) could be entitled to the death benefit. This could have disastrous consequences as you may think that your spouse or children will be the sole recipients of your death benefit. In fact, even a friend you had lent a helping hand could also receive a portion.

Therefore, it is vitally important to know whether your nominated beneficiary will receive your death benefits. This means updating your nomination form after a life-changing event (i.e., getting married, having a child). Let the brokers at PBA Financial Services be your guide.