Warning for pension fund members in South Africa

 ·11 Mar 2023

Pension scheme members may not always have their requests met regarding who benefits from their death.

Imraan Mahomed and Tshepiso Rasetlola from Cliffe Dekker Hofmyer said that retirement funds have rights and obligations that rule over the relationship between its members and the employer, with the board of trustees of the fund guiding the fund’s rules.

The legal experts looked at a case involving the pension of Mkhawuleni Paulus Ndwandwe, who died in 2018.

He was survived by Xoshwaphi Ndwandwe (Mrs Ndwandwe), his wife in customary law, and Thowi Alvinah Ngcobo (Ms Ngcobo), his common-law wife.

The deceased had ten children – five with Mrs Ndwandwe, two with Ms Ngcobo, two sons from a prior relationship, and a minor child born from another relationship.

The deceased was employed by Transnet and was a member of the Transnet Retirement Fund (fund).

In 2000, the deceased completed a beneficiary nomination form that included the people who would benefit from his death: Mrs Ndwandwe, two of his children with Ms Ndwandwe, and two of his children with Ms Ngcobo.

However, in 2019, the fund appropriated the death benefit in a matter that was not in line with the nomination form. It was divided as follows:

  • 40% each to Mrs Ndwandwe and Ms Ngcobo
  • 3.66% each to the adult sons from the prior relationship
  • 12.69% to the minor child

Mrs Ndwandwe approached the High Court to set aside the apportionment by the trustees of the fund.

She said that the trustees of the fund committed a reviewable irregularity by ignoring the contents of the nomination form.

However, the trustees said that they were not bound by the nomination form and could make an independent apportionment of the death benefit as defined by the fund’s rules, especially Rule 10.4(iii), which reads as:

“If a member has a dependant and the member has also designated in writing the fund a nominee to receive the benefit or such portion of the benefit as is specified by the member in writing to the fund, the fund shall within 12 months of the death of such member pay the benefit or such portion thereof to such dependant or nominee in such proportions as the trustees may deem equitable

…provided that this paragraph shall not prohibit the fund from paying the benefit, either to a dependant or nominee contemplated in this paragraph or, if there is more than one such dependant or nominee, in proportions to any or all of those dependants and nominees.”


The court asked if the trustees of the fund complied with Rule 10.4(iii) and if they acted reasonably and rationally when making their decision.

The court said that Rule 10.4 (iii) allowed it to make any distribution to nominees or dependents that it deemed equitable. It added that the trustees of the fund were given large discretion to determine the proportion of the death benefit to his depends, having identified a large class of potential dependants.

The court also held that the trust acted rationally and made a lawful decision regarding the distribution of the death benefits as required by Rule 10.4(iii).


The legal experts said that the judgement is in line with section 37C of the Pension Funds Act 24 of 1956 (PFA).

The PFA allows a board of trustees to take all reasonable steps to find any potential dependents and beneficiaries of death benefits and to equitably distributed them.

A board of trustees is thus not solely bound to the member’s nomination form. 

The fund ultimately has wide discretion to distribute death benefits in a manner that it sees as rational while complying with the rules.

However, Mahomed and Rasetlola said that a member should complete a death beneficiary form, as it remains an important document for consideration by the trustees.

Read: Changes to pensions in South Africa in 2023 – what you need to know

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