Complex death benefit cases unpacked during a recent industry webinar show how quickly section 37C of the Pension Funds Act becomes difficult in practice – particularly where families are large, facts are disputed, or the circumstances of death are unclear.
Section 37C governs how death benefits from retirement funds must be distributed. It places a duty on trustees to identify dependants and nominees and allocate benefits fairly and equitably, considering each person’s financial circumstances. Although nomination forms may guide the process, they are not binding, and trustees must exercise their discretion based on the facts of each case.
A recent EBnet discussion brought together ICTS chief executive David Weil, Momentum Corporate’s Hilda Martins, Simeka’s Mpho Kgomongoe, and Verso’s Brenda Penny, as well as Pension Funds Adjudicator Lebogang Mogashoa.
Mogashoa said trustees should not rely on “industry practice” when making section 37C decisions.
“The moment you start handling section 37C distributions on the basis that… this is industry practice… then you’re treading in very dangerous territory.”
He noted that when disputes reach his office, the focus falls on how trustees exercised their discretion and whether their decisions are properly supported. For trustees, this means being able to show not only what decision was made, but also how and why it was reached.
What the courts have already settled
Kgomongoe, who is the head of legal and technical at Simeka Consultants and Actuaries and chairperson of the Pension Lawyers Association, said court and Adjudicator decisions have established what is expected of trustees when dealing with death benefits.
These decisions require trustees to:
- take reasonable steps to identify all dependants;
- conduct a proper and thorough investigation;
- consider relevant factors, including financial dependency and needs;
- avoid rigid formulas or predetermined approaches; and
- exercise their discretion based on the facts of each case.
She indicated that where these steps are not followed, decisions are vulnerable to being set aside.
Nine dependants, limited benefit
One case, currently being handled by ICTS – a firm specialising in beneficiary tracing and death claims investigations – involved a 30-year-old member whose benefit of just under R150 000 had to be allocated among nine dependants.
As outlined during the discussion, the dependants included:
- two customary spouses;
- two children with the first customary spouse;
- one child with the second customary spouse; and
- four children from previous relationships.
All the children were minors, aged between two and 13.
Where the benefit is small and the dependants are many, the level of need can be such that even a properly considered allocation is unlikely to feel fair to those involved, said Martins, the head of client servicing at Momentum Corporate.
“When I open a resolution… and the dependants are this many,” she said, holding her thumb and forefinger far apart, “and the money is this big”, bringing them much closer together, “my heart sinks”.
Kgomongoe said trustees must weigh a range of factors – dependency, financial position, future earning capacity – and consider them together. In practice, this requires trustees to document how each factor was assessed for each dependant, rather than applying a blanket split.
Penny, the managing director at Verso Employee Benefits Consulting and Trustee Services, said trustees should build a clear profile of each household: who lived with the deceased, who relied on his income, what income remains, and whether other support is available. This information should be recorded and linked directly to the final allocation.
Trustees have up to 12 months in terms of section 37C to identify and trace dependants before making a final allocation, but they should proceed sooner where sufficient information is available and properly verified.
In cases like this, Mogashoa indicated that trustees must be able to demonstrate how they exercised their discretion.
“We’re actually not looking at what the fairest allocation is… What we’re actually looking at is what the reasons for making the decisions that you made are.”
Paternity disputes and factual dependency
Disputes over paternity often complicate the identification of dependants.
Penny said trustees should not rely on affidavits alone where paternity is contested. Depending on the circumstances, this may require DNA testing, interviews with family members, or corroborating evidence of financial support.
Mogashoa noted that biological parenthood is not always decisive. A child who was financially supported by the deceased may qualify as a dependant even if paternity is uncertain.
For trustees, the practical distinction is this:
- If dependency can be proved through financial support, biological proof may not be required.
- If entitlement depends on paternity, the issue must be resolved with appropriate evidence.
Unresolved uncertainty can undermine the entire decision.
Mogashoa also pointed to the need for greater scrutiny where claims come from girlfriends or cohabiting partners, particularly where these are disputed by the deceased’s family. In such cases, trustees should test the claim by looking for consistent evidence of a relationship and financial dependency over time.
“You need to look at how else you can validate some of the claims… because that is definitely going to lead to a dispute.”
Although nomination forms may guide trustees, they are not binding and should be weighed against the full set of identified dependants and their circumstances.
When the cause of death is contested
Some cases turn on how the member died.
Weil described a case involving a member who divorced in 2022, entered a customary reconciliation with the same partner in 2024, and later separated. In December 2025, he was found seated in a wardrobe with a sheet around his neck, in circumstances recorded as suicide.
In such cases, trustees are expected to look beyond the initial classification of death and investigate further where necessary.
Penny said deaths classified as “unnatural” require closer scrutiny, particularly where a potential beneficiary may have been involved. This brings in the common law “bloody hand” principle – a person who unlawfully causes a death cannot benefit from it.
However, trustees must base decisions on established legal outcomes. Penny referred to a case where a spouse poured boiling water over the deceased during an altercation, resulting in his death, but was eventually acquitted based on self-defence.
The practical implication is that suspicion alone is not enough. Trustees should avoid excluding a beneficiary unless there is sufficient legal basis to do so.
Paying while investigations continue
Criminal proceedings and factual disputes can take time. Trustees must decide whether to delay payment.
Mogashoa cautioned against withholding the entire benefit where only part of the claim is uncertain.
“It actually serves no one for the board to withhold the full amount… just because one claimant… still needs further investigation.”
The approach discussed by the panel was to make interim payments to beneficiaries whose claims are clear, while retaining only the portion linked to disputed beneficiaries.
In practice, trustees should document:
- which claims are finalised;
- which remain under investigation;
- and how the retained portion will be dealt with once resolved.
This ensures that vulnerable dependants are not left without support while investigations continue.
What is examined when disputes arise
When matters are referred to the Adjudicator, the emphasis is on process.
Trustees must be able to show that they:
- identified all potential dependants;
- investigated the facts properly;
- considered relevant factors; and
- explained how they reached their decision.
Each of these steps should be documented in a way that allows an external party to follow the reasoning.
If those steps are incomplete or poorly recorded, the decision may be set aside on review by the Adjudicator.
Mogashoa emphasised that reasoning is central, because it allows the Adjudicator to assess whether discretion was properly exercised.
Clear communication with beneficiaries is equally important. Trustees should explain decisions in a way that sets out the factors considered and how they influenced the allocation, reducing the likelihood of disputes.
Balancing disclosure and privacy
The panel also addressed the role of privacy laws in death benefit investigations.
The Protection of Personal Information Act (POPIA) cannot be used to withhold information from the Adjudicator where it is required to assess a complaint.
This is because POPIA does not create an absolute bar on disclosure. It allows – and in some cases requires – the processing and sharing of personal information where there is a legal obligation or a legitimate purpose recognised in law, such as regulatory oversight or dispute resolution.
In this context, providing information to the Office of the Pension Funds Adjudicator forms part of a lawful process. Refusing to disclose relevant information based on POPIA would therefore conflict with the duty to co-operate in the adjudication of complaints.
At the same time, trustees must balance transparency with confidentiality when communicating with beneficiaries.
Kgomongoe explained that sufficient detail can be provided by outlining:
- the level of dependency of each beneficiary;
- their general financial position;
- the number of dependants they support; and
- the key factors considered in the allocation.
This allows trustees to explain why a decision was made without disclosing exact salaries or detailed financial records.
The practical approach is to share reasoning, not raw data.
Practical challenges remain
Panellists noted that the process is often complicated by incomplete or conflicting information.
Weil pointed to recurring difficulties with tracing beneficiaries, inconsistent statements, and reluctance to share information – often driven by mistrust or concerns about fraud. He noted that trustees are frequently dealing with situations where different parties present competing versions of events, requiring careful verification rather than acceptance at face value.
In these circumstances, he emphasised the importance of testing information and looking for consistency across sources. Where details do not align, trustees should probe further rather than proceed on uncertain facts, because unresolved discrepancies often lead to disputes later.
Martins emphasised the importance of starting investigations early, noting that delays make it harder to trace beneficiaries, verify information, and resolve discrepancies.
She said trustees should keep detailed records of all interactions and follow up on inconsistencies as they arise, because issues left unresolved early in the process are more likely to lead to disputes later.
In practice, this means approaching each case with a degree of scepticism, documenting every step, and ensuring that conclusions are supported by verifiable evidence.
As Weil indicated, the challenge is not only identifying beneficiaries but also ensuring that the information used to make decisions can withstand scrutiny if tested.
