The FSCA has issued a new Interpretation Ruling on how to apply the provisions of the Pension Funds Act (PFA) setting out how a retirement fund benefit must be distributed when a member dies.
Interpretation Ruling 1 of 2024 (RF), which was published on 4 March, replaces Interpretation Ruling 1 of 2020, which incorrectly brought an unclaimed benefit within the ambit of section 37C of the PFA.
In August last year, the Authority published a draft Interpretation Ruling for public consultation, with comments due by 26 September 2023.
Read: FSCA to issue a new interpretation ruling on section 37C
The FSCA received nine comments through public consultation on the draft Interpretation Ruling from four commentators. The Authority also engaged with industry participants “to ensure a thorough understanding of the revised interpretation and to avoid any unintended consequences that may arise”, the FSCA said in a communication.
Click here to download the consultation report setting out the comments received and the Authority’s responses.
Katherine Gibson, the deputy commissioner of the FSCA, said section 37C provides that benefits payable because of the death of a member do not form part of the member’s estate and sets out how the benefit payable upon the death of a member must be dealt with.
Interpretation Ruling 1 of 2024 explains the distinction between a benefit becoming payable upon the death of a member, in which case section 37C will apply, compared to a benefit that has already become payable before the member’s death. The latter benefit falls outside the ambit of section 37C, even if the benefit has not yet been paid to the member upon his or her death.
Gibson said a key distinction is the cause of the vesting of the benefit.
Where the death of the member is the cause for the benefit to become payable, section 37C will apply.
On the other hand, if a member has become entitled to claim a benefit and if the fund received a written instruction from the member to pay out or transfer the benefit before the member’s death, then it is that written instruction that caused the benefit to be payable (not the death of the member). Accordingly, section 37C will not apply.
Interpretation Ruling 1 of 2024 also clarifies that section 37C does not apply to an unclaimed benefit and to a member of an unclaimed benefit fund. The reference to “any benefit” in section 37C includes a paid-up member’s benefit and a deferred retiree’s benefit before the fund receives an instruction to pay or transfer such benefits, and not an unclaimed benefit as was set out in Interpretation Ruling 1 of 2020.
For more information, contact Roslynne van Wyk at FSCA.RFDStandards@fsca.co.za.
