Pension payouts: Trustees have final say
Most of us will never read an Act of Parliament from cover to cover, yet legislation affects our lives in ways we may not realise.
The Financial Institutions and Markets Act (FIMA), promulgated in October 2021, came into force on 1 May 2026, replacing several pieces of legislation, including the Pension Funds Act of 1956.
Much of the debate surrounding FIMA has focused on compulsory preservation of retirement benefits. Less attention has been paid to Chapter 5, which governs the retirement fund industry, particularly the distribution of pension death benefits.
Section 276 of FIMA addresses an important question: who receives the benefit when a retirement fund member dies? Is it the surviving spouse, children, parents or creditors?
The law largely retains the protections under the previous legislation while enhancing the payment process.
A key principle is that a pension death benefit does not form part of the deceased’s estate. This protects the money from claims by creditors, including banks and microlenders, and helps ensure it reaches those who depended on the deceased.
Under section 276, a retirement fund’s board of trustees may make an interim payment of part of the benefit to people designated by the deceased as dependants or nominees on the beneficiary nomination form. This can happen before the board completes its investigation, which may take months.
The interim payment is intended to provide financial support while the board identifies dependants and determines how the benefit should ultimately be distributed. When considering the payment, the board uses the nomination form to guide both the recipients and the proportions they may receive.
This makes keeping your beneficiary nomination form up to date essential.
Members must submit the prescribed form to their retirement fund by 30 January each year. If their circumstances change during the year, they can update it, for example, following the birth or adoption of a child or a change in marital status. Where nothing has changed, members must submit a no-change form by the annual deadline.
The form also provides a starting point for the trustees’ investigation into the deceased’s dependants and nominees.
Ultimately, the board of trustees decides who receives the pension death benefit and what proportion each person gets. Neither the member’s wishes, a written will nor a family member automatically determines the distribution.
The aim is social protection: to ensure that people who were financially dependent on the deceased are not overlooked.
Anyone dissatisfied with the distribution may ask the board to reconsider its decision. If the matter remains unresolved after the remedies available under the retirement fund’s rules have been exhausted, a complaint may be lodged with the regulator.
FIMA is intended to protect consumers of financial services. Understanding its provisions helps us benefit from those protections.
Disclaimer: This article is for general information only and does not constitute legal or financial advice. Readers should consult FIMA and seek professional advice about their specific circumstances. Dickson Matengu- Manager, Legal and Company Secretary- Kuleni Financial Services
