By Dickson Matengu
Most of us will never read an Act of Parliament cover to cover. Yet every Act of Parliament is binding on all and directly or indirectly affects us.
The Financial Institutions and Markets Act, commonly known as “FIMA”, was promulgated in October 2021.
Since its promulgation, most of the debate about FIMA centred on draft regulation on compulsory preservation of retirement benefits.
Far less has been said about Chapter 5 of FIMA, which primarily governs the retirement fund industry. In fact, almost nothing has been said about the distribution of pension death benefits.
FIMA came into force on 1 May 2026, replacing, among other pieces of legislation, the Pension Funds Act, 1956.
Section 276 of FIMA regulates what happens to the money we saved through a retirement fund when we die. Section 276 answers a question many families will face: when a person who was a member of a retirement fund dies, who receives the benefit that becomes payable by the retirement fund?
The benefit payable on the death of a member is commonly known as a “pension death benefit”. So, who is entitled to receive the pension death benefit? Is it the surviving spouse, parents, or children? Is it the creditors of the deceased?
The protection of pension death benefits remains largely the same in FIMA as it was with the old Act, whereas the payment of the pension death benefit has been enhanced.
Section 276 of FIMA carries forward the fundamental principle of section 37C of the old Act, namely, the social protection of people who were dependent on the deceased.
FIMA provides that the pension death benefit does not form part of the deceased’s estate. This is so because an estate is within the reach of the deceased’s creditors such as banking institutions, microlenders, etc. By placing the pension death benefit outside the estate of the deceased, the creditors can lay no claim over it.
In terms of FIMA, the board of trustees of the retirement fund is obliged, after being notified of the death of a member, to pay (“interim payment”) a portion of the pension death benefit it considers wise to the people designated by the deceased as “dependants” or “nominees” on the beneficiary nomination form.
The interim payment is made before conducting a full investigation of the dependants and nominees of the deceased, which may take months to finalise. The interim payment is made to people designated by the deceased in a beneficiary nomination form.
The interim payment is intended to ensure that people who were dependent on the deceased are not left without financial means, while the tracing of dependants and allocation of the pension death benefit is ongoing.
When the board considers making an interim distribution of a portion of the pension death benefit, it is guided by the completed beneficiary nomination form in respect of who may be paid.
Similarly, the board is guided by the beneficiary nomination form regarding the proportion which may be paid to the respective designated dependants or nominees.
So, retirement fund members need to complete and submit the prescribed beneficiary nomination form to their retirement fund.
The law states that the beneficiary nomination form be submitted by 30 January each year. However, members are also at liberty to update the beneficiary nomination form throughout the year whenever life changes, i.e., birth of a child, legal adoption of a child, a change in marital status, etc.
Where there is no change to the information provided in the previous beneficiary nomination form, a member is required to submit a no change to the beneficiary nomination form by 30 January each year.
The beneficiary nomination form also serves as the starting point for full investigations by the board of trustees to identify the dependants or nominees.
Who decides as to who may receive and what proportion of the pension death benefit? The law stipulates that the board of trustees of a retirement fund decides.
The board decides firstly who is entitled to the benefit and secondly, what proportion of the pension death benefit each person will receive.
It may seem strange that the board of trustees, not yourself or your written will or family member, has the final say in the distribution of a pension death benefit.
The underlying purpose is social protection. No one who was financially dependent on you should be left out.
The board of trustees has a solemn responsibility to ensure that the pension death benefit is distributed to the rightful dependants and nominee in a fair proportion.
Persons who are not satisfied with the manner or proportion of the distribution of the pension death benefit may request the board of trustees to reconsider their decision.
If the person remains dissatisfied with the board of trustees’ decision and has exhausted the remedies provided in the Rules of the retirement fund, such person may lodge a complaint with the regulator.
FIMA was written to protect consumers of financial services. Understanding it is how we make sure it does. If you have questions about the distribution of pension death benefits or Chapter 5 of FIMA, let’s talk.
This article is for general information only and does not constitute legal or financial advice. Readers should consult FIMA and seek professional advice for their specific circumstances.
* Dickson Matengu- Manager Legal and Company Secretary
