Your Pension Fund Isn’t In Your Will.

The pension fund myth

Most South Africans who have a pension fund, provident fund, or retirement annuity believe some version of the following: "My spouse and kids are listed as beneficiaries, so they'll get the money when I die."

This belief is understandable. It is also incomplete enough to cause serious financial harm to the people you love most.

Here is the legal reality, grounded in Section 37C of the Pension Funds Act 24 of 1956.

What Section 37C actually says

When a pension or provident fund member dies before retirement, the death benefit does not form part of their deceased estate. Your will has no jurisdiction over it. The money goes to the trustees of your fund, who are empowered and required to investigate and distribute the benefit among your financial dependents in a manner they determine to be equitable and rational.

The trustees must search for all potential dependents: your spouse, your children, any parent or sibling you were supporting, an elderly relative in your care, a life partner who wasn't formally married to you, and any person financially reliant on you. They have up to 12 months to complete this investigation and make a distribution decision.

Your nomination form (the one HR gave you when you joined) is not binding. The High Court confirmed this again in 2023 in Ndwandwe v Trustees of Transnet Retirement Fund. In that case, the trustees distributed benefits across two families, including dependents not listed on the nomination form. The court found the decision rational and equitable.

A nuance that matters

The rule that trustees decide who gets what applies to lump sum death benefits from pension and provident funds. But there are important exceptions.

Retirement Annuity funds follow the same Section 37C process for death before retirement.

Living annuities are different. If you hold a living annuity and you die, the money goes directly to your nominated beneficiaries, bypassing your estate entirely and without trustee discretion. This is one of the most powerful estate planning tools in the SA toolkit.

Guaranteed (life) annuities typically stop paying on death. Tax-free savings accounts operated under a life licence allow beneficiary nominations that work similarly to living annuities, funds are transferred directly to nominated beneficiaries.

The key takeaway: the rules differ by product. Many South Africans hold a mix of products and apply the same assumption to all of them. That assumption is wrong for some and right for others.

What updating your nomination actually achieves

Since trustees are not bound by your nomination form, why bother updating it? Several reasons.

First, a clear and current nomination form significantly reduces the time it takes for trustees to complete their investigation. The 12-month window is a maximum. In practice, disputes over outdated or absent nominations can push distributions close to that ceiling, during which time your family has no access to the funds.

Second, the Supreme Court of Appeal has been clear in cases like Fundsatwork Umbrella Pension Fund v Guarnieri: trustees must seriously consider the wishes expressed in nomination forms. The starting point is always the member's stated preferences. They can deviate and often should where there are unrecognised dependants, but an up-to-date nomination stacks the evidence in your family's favour.

Third, without any nomination, and if no dependants can be identified, the benefit falls into your deceased estate. Once there, it attracts estate duty at 20% on estates above R3.5 million, executor fees of up to 3.5% plus VAT, and potentially lengthy delays through the Master's office.

The practical steps that actually matter

Update your nomination form immediately if any of the following have occurred since you last filled it in: marriage, divorce, birth of a child, death of a previously nominated beneficiary, change in financial dependency of a family member, or entry into a domestic partnership. Include full names, ID numbers, relationships, and the percentage allocation you want each person to receive. Submit it to your HR department or fund administrator in writing, and keep a dated copy yourself.

For more complex estates, blended families, business interests, significant assets, and ex-spouses who may still have dependency claims, speak to an independent financial planner who specialises in retirement and estate planning. The cost of that advice is trivial against the family disputes it prevents.

One structural limitation worth knowing: you cannot use a pension fund nomination to disinherit someone you are legally liable to maintain. If you have minor children from a prior relationship, they have a legal claim on your retirement fund’s death benefit regardless of who you nominate. The trustees will find them.

The broader financial literacy point

SA's retirement savings system is among the most sophisticated in emerging markets. The Two-Pot Retirement System, introduced in September 2024, added another layer of complexity that most members still don't fully understand. The FSCA regularly publishes data showing that a significant proportion of SA fund members have never updated their nomination forms, and many have never completed one at all.

This costs families money. It delays distributions. It creates disputes that are profoundly expensive to resolve emotionally and legally, and it is entirely preventable.

Take 30 minutes this week. Log in to your fund's member portal or contact your HR department. Confirm your nomination is current. Check that the people you want protected are clearly documented. Then set a calendar reminder to review it again when your life circumstances change next.

Investor Takeaway

Nomination forms are not legally binding on pension fund trustees, but they are the most important document you can provide to guide the distribution of your death benefit. Keep them current. Use living annuities for assets where you want a guaranteed, direct transfer to nominated beneficiaries without trustee discretion. For complex family structures, get qualified advice.

This article is for general informational purposes only and does not constitute financial, legal, or tax advice. Consult a registered financial adviser and an estate planning attorney for advice specific to your circumstances.