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Who can receive death benefits from a pension fund?
14 January 2020
 
“My father recently passed away followed two days later by my mother after a terrible car accident. My father was 63 and still permanently employed and contributing to his pension fund. I’m the only child and dependent of my father and was wondering whether my father’s pension fund death benefits will pass to me or my mother’s estate? I ask, as my mother has two children from a preceding marriage that I’m sure will also inherit from her and I wouldn’t want my father’s pension benefits to be shared with them.”

It is correct that a pension fund should pay out death benefits where a member of the fund passes away before he is able and/or entitled to go on pension. Some pension funds even provide for certain death benefits to be paid out where a member of the fund dies within a few years after the member retired. The payment of pension benefits upon death is regulated by section 37C of the Pension Funds Act 24 of 1956. 

To address your question, we must first unpack the meanings of “member” and “dependent”. A “member” is the person who had a pension account with the relative fund and who would have been entitled to receive a pension payout upon retirement. In your case, your father would be the member who passed away before he could receive his pension payout. A deceased member remains a member of the relevant pension fund and, consequently, the Pension Funds Act will continue to apply, even after the person has passed away. 

A “dependent”, or beneficiary, on the other hand, is an individual who is eligible to receive death benefits. To qualify as a dependent, it is not a requirement that the dependent must have been financially dependent on the member at the date of death of the member. 

After the death of a member, the pension fund has 12 months to trace all dependents of the deceased member and then decide how the death benefits are to be distributed between the dependents. So, the question is whether you and your mother’s estate would both qualify as dependents for purposes of your father’s pension benefits. 

Our courts recently had to determine at what stage a person must be a dependent to be entitled to participate in a distribution of death benefits. In other words, is it the date of the member's death, or the date upon which the decision concerning the distribution is made, or the date of the distribution itself? The court concluded that the time at which to determine who a dependent is, is when that determination is made, and that, additionally, the person concerned must still be a beneficiary at the time when the distribution is made by the pension fund.

In your situation, the fact that your mother passed away shortly after your father will, therefore, mean that, at the time a determination is made by your father’s pension fund, your mother will no longer be a dependent or beneficiary, capable of receiving death benefits. Unless there are other dependents located by the pension fund, it would mean that your father’s death benefits should be paid out to you as the sole dependent of your father. 

The allocation and distribution of death benefits can be a complicated affair and it may be prudent to seek legal advice should any aspect or application be unclear.
 
 
 
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