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LEGAL NOTE | FSCA Interpretation Ruling 1 of 2024

This Interpretation Ruling was issued to provide clarity, consistency and certainty in the interpretation and application of section 37C of the Pension Funds Act (“the Act”). It revokes and replaces FSCA Interpretation Ruling 1 of 2020. On 25 March 2020, the FSCA issued Interpretation Ruling 1 of 2020, which replaced Information Circular PF no. 2 of 2010. Requests were made to the FSCA to consider certain aspects of that ruling which required revision, specifically in respect of unclaimed benefits.

Interpretation and Application of section 37C of the Act: Section 37C(1) of the Act provides the following: “Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit (other than a benefit payable as a pension to the spouse or child of the member in terms of the rules of a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a member, shall, subject to a pledge in accordance with section 19(5)(b)(i) and subject to the provisions of sections 37A(3) and 37D, not form part of the assets in the estate of such a member, but shall be dealt with in the following manner…”.

Section 37C says that benefits resulting from a member’s death do not form part of their estate. It does not specify how to calculate these benefits, which must align with the fund’s rules. Section 37C mandates funds to trace beneficiaries or nominees and distribute benefits upon the death of the member. If the fund’s rules are in contravention with the provisions in section 37C, section 37C shall prevail.

The phrase “payable …upon the death of a member” in section 37C means that it is the event of the member’s death that causes the benefit to be payable. This means that if a benefit has become payable before a member’s death, even if it has not yet been paid, it does not fall within section 37C. This applies if a member, before his death, instructed the fund in writing to pay or transfer the benefit. In such cases, the written instruction, and not the member’s death, triggers the payment of the benefit, therefore making section 37C inapplicable. In other words, the benefit vested in the member at the moment when they provided the payment instruction to the fund and on vesting it became payable.

The fact that a member has passed away does not diminish the fact that the benefit had already vested and had been payable prior to the member’s death. However, the following applies to unclaimed benefits: The above principle, in relation to unclaimed benefits, remains consistent. Such benefits are owed to the entitled person, as the benefit has become due and payable to the person entitled to it. Even when transferred to an unclaimed benefit fund, the nature of the unclaimed benefit does not alter. If the entitled individual is traced, the benefit must be paid to that person. An unclaimed benefit is not due and payable because of the death of a member, and section 37C will not be applicable when that member dies. Where the person entitled to an unclaimed benefit dies, the benefit, which has vested in that person, must be paid to that person’s estate and section 37C does not apply.

Similarly, where an unclaimed benefit arose from a death benefit distributed in terms of section 37C, the section does not apply upon the death of that beneficiary who is entitled to that undistributed death benefit in an unclaimed benefit fund. Such an unclaimed benefit vested in the beneficiary and must be paid to their deceased estate. Although the person entitled to the benefit is a member of the unclaimed benefit fund, it is not their death that makes the benefit payable, and the trigger in section 37C “payable upon the death of a member” does not apply.

In the instance of paid-up members and deferred retirees, if a member does not choose to receive their benefit when leaving service before retirement, they remain a paid-up member. A paid-up member and a deferred retiree are both considered members in the Act. If a paid-up member or deferred retiree instructs the fund to pay or transfer their benefit, or to treat it as a retirement benefit, the benefit becomes payable. If the paid-up member or deferred retiree passes away after giving such instruction to the fund but before the benefit is processed, it must be paid to their estate.


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