Retirement fund death benefits aren’t a right for the nominated

Laura du Preez | 03 April 2023

Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses. 

Death benefit cases before the Pension Funds Adjudicator prove that retirement fund trustees often struggle to untangle who was legally and factually dependent on a member after they die and to whom the member wanted the money allocated. 

This can cause lengthy delays in awarding the money. 


You should always fill in a death benefit nomination form and update it regularly so the trustees know who you were supporting financially and your wishes. If your affairs are complicated, leave a letter for the trustees explaining the circumstances.

Difficult death benefit cases were highlighted again at the Pension Lawyers Association conference held in Cape Town recently.

They show that if you are nominated as a beneficiary of a member’s death benefits, you are entitled to be considered for, but not necessarily to be allocated, those benefits.

South African retirement fund trustees have to identify your dependants, how much they depended on you financially, check whom you have nominated to receive the money, and then only decide the best way to allocate that money.  Read more: What happens to my retirement savings if I die before retirement?

The fiancée that no longer was

An Afrox Provident Fund member’s failure to update his nomination form before he died resulted in the board’s decision on how to allocate his death benefits being challenged, Naheem Essop, senior legal adviser at the Pension Funds Adjudicator told the conference.

The member died in 2018, four years after a relationship with his fiancée ended, but she had been nominated as the sole beneficiary of his death benefits, Essop said.

Investigations into the case proved the couple were no longer together and the member had intended to change his nomination to make his sister the beneficiary. However, he died before completing a form he had collected from his employer, Essop said.

Before he died, the terminally ill member told his sister and brother he had fathered a child with another woman and wanted to support it.

But neither he, his family nor the administrator of the fund were able to find the child or its mother.

The trustees allocated the death benefits to the unknown child and said if the child did not come forward within a “reasonable period”, the death benefit should be shared between his siblings.

The board said the older siblings were likely to have become dependent on the member in future.

When siblings can be dependants

The former fiancée complained to Pension Funds Adjudicator, claiming that as a nominated beneficiary she was entitled to the benefit.

The adjudicator wanted the board to reconsider its decision, but the siblings took an appeal to the Financial Services Tribunal. The tribunal ordered the adjudicator to hear their views.

The adjudicator then issued a reconsidered determination setting aside the board’s decision. In this final determination, the adjudicator said:

  • The board needed to properly investigate the sibling’s dependency on the member;

  • Siblings can only be legal dependants if they cannot claim maintenance from their parents, children or spouses and would become indigent;

  • The siblings’ claim that they were state pensioners and the member was already supporting them (as factual dependents) needed to be investigated;

  • Only once the board had established the siblings’ dependency, could it decide how to distribute the benefit between them, as dependants, and the former fiancée, as a nominee; and

  • The board could still decide to allocate nothing to the former fiancée, as the evidence suggested she was not a life partner or dependent on the deceased. But as she was a nominee, she was entitled to be considered.

New fiancée entitled ahead of sponsoring ex-wife

Another case highlighted by Essop also proves that being nominated does not entitle you to death benefits if other dependants have a greater need for the money.

The adjudicator received a complaint from a divorcee who had paid contributions to a Momentum retirement annuity (RA) on behalf of an ex-husband while they were married, Essop said.

When they divorced, the RA was paid up and they had agreed in a divorce order that if he predeceased her, the proceeds would be paid to her. He had nominated her as the beneficiary, she was named in his will and she intended to split the money between their young adult children, Essop said.

However, when the member died he had been in another relationship for 18 months and was engaged to be married.

His new life partner was financially dependent on him, while his former wife of 21 years and young adult sons were not, Essop said.

The board therefore decided to allocate 100% of the death benefits to the member’s fiancée.  

The former wife complained to the adjudicator and later to the Financial Services Tribunal but both found the board’s decision was sound and dismissed her complaint.

Former partner’s right despite mother’s dependency

In the third case, a nominated beneficiary successfully challenged a board decision to award all the death benefits to a dependant.

A member of the Netcare Pension Fund nominated her life partner as the beneficiary of her benefits in 2004. The couple separated in 2008, but remained friends and agreed not to change their nominations of each other as beneficiaries of their retirement savings, Essop said.

After the member died in 2019, the board allocated her death benefits to her mother as it found:

  • The member had made an addendum to her will in 2017 leaving her mother as the sole beneficiary of her estate;
  • The mother was in fact being supported by her daughter;
  • The member’s nomination form had not been updated since 2004.

The former life partner complained to the adjudicator that she should at least get 50% of the benefit as the mother’s needs were reduced by the fact that she was 73 years old, was receiving a pension and rental income and had inherited her daughter’s portion of a house, Essop said

The adjudicator ordered the trustees to reconsider their decision taking into account the extent to which the mother was dependent on her daughter before disregarding the nomination of the former life partner.

The former life partner’s entitlement stemmed from the fact that she was nominated by the deceased – she did not have to prove that she was financially dependent on the deceased at the time of death, the adjudicator said.

Things to remember

These cases highlight:

  • The importance of updating your beneficiary nomination form, so your trustees can be sure your wishes were your most recent ones.
  • Nominating anyone who you support financially as they are legal or factual dependants;
  • Considering who may be dependent on you in future;
  • Before you nominate someone who is not dependent on you, remember that your benefits must meet your dependants’ needs before someone who isn’t a dependant can be allocated any of the money.