Warning for members of pension funds in South Africa


Pension plan participants may not always honor their requests about who benefits from their death.

Imraan Mahomed and Tshepiso Rasetlola van Cliffe Dekker Hofmyer said pension funds have rights and obligations that govern the relationship between their members and the employer, with the fund’s board of directors leading the fund’s rules.

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

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

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

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

In 2000, the deceased filled out a beneficiary nomination form identifying the people who would benefit from his death: Mrs. Ndwandwe, two of his children with Mrs. Ndwandwe, and two of his children with Mrs. Ngcobo.

However, in 2019, the fund appropriated the death benefit in a case that was inconsistent with the nomination form. It was divided as follows:

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40% each for Mrs. Ndwandwe and Mrs. Ngcobo 3.66% each for the adult sons from the previous relationship 12.69% for the minor child

Ms Ndwandwe went to the Supreme Court to annul the distribution by the trustees of the fund.

She said the fund’s managers committed an verifiable irregularity by ignoring the contents of the nomination form.

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

“If an affiliate has a dependent person and the affiliate has also appointed the fund in writing an authorized person to receive the distribution or such part of the distribution as has been specified in writing by the affiliate to the fund, the fund shall within 12 months after the death of such member pays the benefit or such portion thereof to such dependent or nominee in such proportions as the trustees deem equitable

… provided that this paragraph does not prohibit the fund from paying the distribution either to a dependent or nominee referred to in this paragraph or, if there is more than one dependent or nominee, in proportion to one or more of those dependents or authorized persons. ”


The court asked whether the fund’s trustees complied with rule 10.4(iii) and whether they acted reasonably and rationally in making their decision.

The court said rule 10.4(iii) allowed it to make any distribution to nominees or dependents it deemed fair. It added that the fund’s managers were given wide discretion to determine the proportion of the death benefit relative to its dependents, after identifying a large pool of potential dependents.

The court also found that the trust acted rationally and made a lawful decision with respect to the distribution of death benefits, as required by Rule 10.4(iii).


The legal experts said the verdict is in accordance with Section 37C of the Pension Funds Act 24 of 1956 (PFA).

The PFA enables a board of directors to take all reasonable steps to identify potential dependents and beneficiaries of death benefits and distribute them fairly.

A board of directors is therefore not only bound by the nomination form of the member.

The fund ultimately has wide discretion to pay death benefits in a manner it deems rational and in compliance with the rules.

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

Read: South Africa pension changes in 2023 – what you need to know

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