Section 37C: what trustees must do to trace beneficiaries

Section 37C of the Pension Funds Act 24 of 1956 governs what happens to a death benefit when a member of a retirement fund dies. It takes the benefit out of the member’s estate and out of the member’s own hands: the nomination form is a factor the board must consider, not an instruction it must follow. In its place the section puts a duty on the board of trustees, and most Section 37C complaints to the Pension Funds Adjudicator turn on whether that duty was properly discharged. This guide sets out what it requires.

The three duties

1. Identify and trace the member’s dependants and nominees. The board must find out who they are and where they are, not merely read the nomination form.
2. Investigate their circumstances. Age, relationship to the member, extent of dependency, financial position and other sources of support, for each of them.
3. Distribute equitably. Decide how the benefit is allocated among them and in what form (lump sum, trust, annuity, or payment to a guardian), on the facts gathered.

The first duty is the one most often done badly, because the fund’s own records cannot answer it. It is also the one a tracing agent exists to perform.

Who is a dependant

The Act defines a dependant in four groups. Only the first is usually visible in the fund’s records.

• A spouse, including a partner in a customary, religious or permanent life partnership.
• A child, including an adopted child, a child born out of wedlock and a posthumous child, whether or not the member supported them.
• Anyone the member was legally liable to maintain, or would have become liable to maintain had the member lived.
• Anyone who was in fact financially dependent on the member at the date of death: a parent, a sibling, a partner, a grandchild.

A nominee is someone the member named on the nomination form who is not a dependant. Nominees can share in the benefit, but the board must first establish whether dependants exist and what they need.

The twelve-month window

The section gives the board twelve months from the member’s death to trace dependants. If none are found in that time and the member left a valid nomination, the board may pay the nominees. If there are neither dependants nor nominees, the benefit is paid to the estate, or to the Guardian’s Fund where no estate is reported. The twelve months are not a waiting period. They are the time in which the board must be able to show it looked, and the Adjudicator has repeatedly found against boards that waited twelve months and then paid the nominee without a real investigation.

What a proper investigation looks like

1. Confirm the death and the member’s identity with Home Affairs, and establish whether an estate has been reported to the Master.
2. Build the family from the records: Home Affairs birth, marriage and death records expanded from the member, which surface spouses and children regardless of what the nomination form says.
3. Reconcile the family with the nomination form and the employer’s records, and flag every person in the lineage who is not on the form.
4. Trace and contact each person, digitally and in the field, and obtain evidence of their identity, relationship and dependency.
5. Record every step with dates, so the board can demonstrate the investigation if a complaint is lodged.

The evidence a board needs before it distributes

• A verified identity for each dependant and nominee, with a certified copy of the ID document.
• Proof of relationship: birth certificate, marriage certificate or proof of customary marriage, adoption order.
• Proof of factual dependency where it is claimed: an affidavit and supporting documents such as proof of payments or shared residence.
• Each person’s circumstances: age, income, other support, and for minors the guardian’s details and proof of guardianship.
• Banking details confirmed in the recipient’s name, and the completed claim forms.
• The dated record of the tracing steps taken, including for dependants who could not be found.

Common failures the Adjudicator sees

• Paying the nominee because twelve months passed, without a documented trace.
• Treating a child from an earlier relationship, or a customary spouse, as not a dependant because the family did not mention them.
• Assuming a non-dependent adult child needs nothing, without asking.
• Paying a minor’s share to an adult without establishing guardianship.
• No record of what the board did, so the decision cannot be defended.

Where a tracing agent fits

The board makes the allocation. A tracing agent supplies the facts the allocation must rest on: the family map, the verified identities, the dependency evidence and the dated record. xverified’s Section 37C beneficiary tracing service is built around this list, and is priced only on dependants and nominees actually found and verified.