Concourt clarifies who is entitled to pension benefits when a worker dies

THE rules on who gets what in terms of retirement benefits and life insurance payouts when a pension fund member dies have proved a headache for pension funds for almost 50 years, with certain requirements remaining contentious to this day.

- MARTIN HESSE

These rules have been in place since 1976, when a crucial amendment was made to the Pension Funds Act of 1956. The amendment introduced the famous (or infamous, whichever way you look at it) Section 37C, which changed the way monetary payouts were made to beneficiaries. In fact, it changed who those beneficiaries were, placing the onus on the pension fund to find out.

In a privately held life policy, the process is simple: the payout on the death of the person insured goes to whomever he or she nominated as a beneficiary. If there is more than one, the money is apportioned according to the percentage ascribed to each beneficiary. If no beneficiaries are nominated (a mortal sin, in my view), the payout goes to the dead person’s estate. No quibbles.

Until 1976, pension fund payouts were almost as simple — essentially, the payout was made according to the terms of the deceased’s will or, if there was no will, according to the laws of intestate succession.

Under Section 37C, payouts became far more complicated and onerous for pension funds and far more contestable in court.

The provisions override the will or intentions of the deceased by requiring the fund, in distributing the benefit (which may consist of both retirement savings and a group life policy payout), to prioritise financial dependants of the deceased — in other words, those who really need the money — even if they are not named as beneficiaries. It requires a pension fund to actively identify dependants and apportion the money according to what it decides these dependants deserve.