Your Retirement Fund and Your Estate: Why Your Will Doesn't Control Your RA

Here's something most South Africans don't know until it's too late: your will has zero authority over who receives your retirement annuity or pension fund when you die.

You could have the most detailed, carefully drafted will in the country. You could specifically name your spouse, your children, your favourite cousin. Doesn't matter. When it comes to your retirement fund, the fund's board of trustees gets the final say — and they're legally required to follow Section 37C of the Pension Funds Act, not your will.

This catches people off guard constantly. And with the two-pot retirement system now in play, your retirement fund structure is more complex than ever. Here's what you need to know to make sure your retirement savings actually go where you want them.

What Is Section 37C?

Section 37C of the Pension Funds Act (No. 24 of 1956) is the law that governs how retirement fund death benefits are distributed in South Africa. It applies to:

• Pension funds
• Provident funds
• Retirement annuity funds (RAs)
• Preservation funds

Under Section 37C, when a fund member dies, the board of trustees must identify all the deceased's dependants and nominees, then distribute the benefit in a way that's "equitable" — fair — considering everyone's needs.

The key word is must. Trustees don't just rubber-stamp your beneficiary nomination form. They're legally obligated to consider the broader picture.

Who Counts as a "Dependant"?

The Pension Funds Act defines dependants broadly. They include:

• Your spouse (including customary and civil union partners)
• Your children (including adopted children and children born outside marriage)
• Anyone financially dependent on you at the time of your death
• Anyone who you were legally liable to maintain (e.g., a former spouse under a maintenance order)
• Anyone who the fund considers was financially dependent on you based on the facts

That last point is the broadest. It means the trustees can identify dependants you may not have even considered — or in some cases, people you specifically wanted to exclude.

Why Your Beneficiary Nomination Form Isn't Binding

Most retirement funds ask you to complete a beneficiary nomination form when you join. You fill in names, ID numbers, percentages. It feels official. It feels final.

It's not.

Your nomination form is an indication of your wishes. Trustees must take it into account, but they are not bound by it. If they identify dependants who weren't nominated — or if the nominated split doesn't seem equitable — they can (and do) change the allocation.

This has been confirmed in multiple Pension Funds Adjudicator rulings and High Court decisions. The most cited case is Mashego v SAMWU National Provident Fund, which established that trustees must conduct their own investigation into dependants regardless of what the nomination form says.

Common Scenarios Where Your Nomination Gets Overridden

• You nominate your new partner but have minor children from a previous relationship. Trustees will allocate a portion to the children.
• You nominate 100% to your spouse but were supporting elderly parents. Your parents may receive a share.
• You nominate a friend or sibling but have a legal spouse. The spouse's claim will likely take priority.
• You don't complete a nomination form at all. Trustees still distribute based on Section 37C — they just have less guidance on your wishes.

The Two-Pot Complication

Since the two-pot retirement system launched in September 2024, your retirement fund now has three components:

• Retirement pot (two-thirds of new contributions)
• Savings pot (one-third of new contributions)
• Vested component (pre-September 2024 savings)

All three components are subject to Section 37C on death. But there's a practical question: if you've been withdrawing from your savings pot annually, you're reducing the total death benefit available.

For someone earning R30,000/month with a 15% contribution rate, the savings pot accumulates roughly R18,000-R19,000 per year. If you withdraw annually, that's R18k-R19k less (minus tax) that's available to your dependants.

Over 10 years of annual withdrawals, you could reduce your death benefit by R200,000+ (accounting for lost growth). That's money your family won't see.

How to Make Sure Your Retirement Fund Goes Where You Want

1. Complete (and Update) Your Beneficiary Nomination Form

Yes, it's not binding. But it's still your strongest signal to trustees about your wishes. A clear, up-to-date nomination form makes the trustees' job easier and increases the chance they'll follow your allocation.

Update it when:

• You get married or divorced
• You have children
• A nominated beneficiary dies
• Your financial dependants change
• You move in with a long-term partner

2. Consider a Section 37C-Compliant Trust

If you have complex family arrangements — blended families, disabled dependants, minor children — a trust can help ensure your wishes are carried out more precisely. You nominate the trust as beneficiary, and the trust deed specifies how the funds should be used.

This doesn't override Section 37C entirely, but trustees generally respect trust nominations when the trust clearly serves the identified dependants.

3. Keep Records of Your Dependants

Trustees need to identify all dependants. If you have dependants who aren't obvious — a partner you're not married to, a child in another province, an elderly parent you support — make sure there's a paper trail.

Keep records of:

• Financial support you provide (bank transfers, receipts)
• Cohabitation agreements
• Maintenance agreements
• Proof of your children's living arrangements

4. Understand What's NOT Subject to Section 37C

Not all retirement income products fall under Section 37C. Once you retire and purchase an annuity, the rules change:

• Living annuity: You nominate beneficiaries, and this nomination IS generally binding (it's an insurance product, not a pension fund benefit). Your living annuity passes to your nominated beneficiaries.
• Life annuity (guaranteed): Payments stop when you die (unless you chose a guarantee period). There's nothing to distribute.

This is actually one of the advantages of a living annuity — you have more control over who inherits the remaining capital.

5. Don't Rely on Your Will for Retirement Fund Benefits

Your will covers your estate assets: property, bank accounts, investments, personal possessions. Your retirement fund is not part of your estate (this is actually a tax benefit — retirement fund death benefits don't attract estate duty up to certain thresholds).

Think of it as two separate systems:

Special Situations

Divorced? Your Ex May Still Have a Claim

If your divorce order includes a pension interest claim (under Section 7(8) of the Divorce Act), your ex-spouse may be entitled to a portion of your retirement fund. This applies to the fund value at the date of divorce.

Even after divorce, if you haven't processed the pension interest split, it sits as a claim against your fund. If you die before it's processed, it complicates Section 37C distribution.

Action: If you're divorced and there's a pension interest order, process it immediately. Don't let it linger.

SA Expats: Double Complexity

If you've emigrated but still have an RA or preservation fund in South Africa, your estate planning gets significantly more complex:

• Section 37C still applies to your SA retirement fund
• Your new country may also claim tax on the benefit
• Double taxation agreements may or may not help
• Your foreign will likely won't cover your SA retirement fund

If you're in the UK, Australia, UAE, or elsewhere — get advice from a cross-border financial planner. The SA fund follows SA law regardless of where you live.

The 12-Month Rule

Trustees have 12 months from the date of death to trace and identify all dependants and distribute the benefit. If they can't trace a dependant within 12 months, the benefit may be paid to the deceased's estate (and then distributed according to the will or intestate succession).

This is another reason to keep your nomination form current and your fund's records up to date — it speeds up the process for your family during an already difficult time.

Tax on Retirement Fund Death Benefits

When your retirement fund pays out a death benefit, it's taxed according to the retirement fund lump sum tax tables — not normal income tax rates. For 2026/27:

• First R550,000: 0% tax
• R550,001 – R770,000: 18%
• R770,001 – R1,155,000: 27%
• Above R1,155,000: 36%

Important: these thresholds are cumulative lifetime thresholds. They include any previous retirement fund lump sum withdrawals (including two-pot savings pot withdrawals). So if you've been withdrawing from your savings pot annually, you've been using up your tax-free threshold.

This is yet another hidden cost of annual two-pot withdrawals — you're not just reducing the benefit amount, you're pushing more of the remaining benefit into higher tax brackets for your dependants.

Action Checklist

Bottom Line

Your retirement fund is probably your biggest financial asset. For many South Africans, it's worth more than their house. And yet most people spend more time planning what happens to their furniture than what happens to their pension.

Section 37C exists to protect dependants — and it generally does a good job. But it works best when fund members engage with it: keep your nomination form current, document your dependants, and understand that your retirement fund follows its own rules.

Your will is essential. But for your retirement fund, it's not enough.

Use our retirement calculators to see where you stand — and make sure what you're building goes to the people who matter most.