The distribution of retirement fund death benefits: an analysis of the equitability and constitutionality of Section 37C of the Pension Funds Act 24 of 1956

Doctoral Thesis

2021

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In 1976, the legislature introduced a far-reaching amendment to the Pension Funds Act. The amendment was the insertion of s37C into the Act. Section 37C effected a fundamental change to the law of succession and the principle of freedom of testation. It did so by removing what, for many, is their most valuable property, from the reach of the law of succession or any other law and subjecting it to a sui generis statutory regime. Under this regime, the power to control the devolution of death benefits has been transferred from the individual who ‘owns' the benefit to the trustees of the pension fund. Trustees are, in turn, permitted to delegate their power. The result is that a stranger or a group of strangers have the power to select the beneficiaries of the deceased's principal asset from amongst the deceased's dependants, as defined, and any additional non-dependent nominated beneficiaries, with far-reaching and possibly life-changing consequences for those affected by the decision. The trustees are even permitted to make decisions that are contrary to, and arguably less equitable than, those of the individual, and yet their right to do so is recognised in law. Section 37C has been in existence for 40 years; its import, and impact, has increased significantly over the course of the past 20 years – yet most of those affected remain unaware of its existence. The study demonstrates that in its present form, s37C is both unconstitutional in its design and inequitable in its operation. As such, it is in urgent need of reform.
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