Death benefits in the retirement funds world
A long-running dispute over the distribution of a deceased member’s pension benefits has travelled full circle from the pension fund’s initial decision, through a challenge before the Pension Funds Adjudicator (the Adjudicator), and on to the High Court, the Supreme Court of Appeal and the Constitutional Court (CC) before landing up back at the fund.
Revisiting the distribution decision
In its 8 August 2025 order, the CC directed that “the matter be remitted [back] to the Municipal Gratuity Fund to make a fresh determination of dependency and determine an equitable allocation and distribution of the deceased’s death benefit having regard to the circumstances as of 9 April 2014.” Your writer spent an hour or three trawling through the 46-page judgment to get to grips with the facts and hopefully shed some light on how a pension fund and its trustees should approach this important function.
Mutsila v Municipal Gratuity Fund and Others [2025] ZACC 17 begins with an introduction to the law governing how retirement funds distribute a deceased member’s funds to his or her dependants. These benefits must be distributed in terms of section 37C of the Pension Funds Act (the PFA), which the CC described as “a far-reaching and relatively unique statutory provision.” The court framed the application and its subsequent decision in the context of South Africa’s extreme unemployment and high dependencies on single breadwinners.
The applicant in this matter was Tshifhiwa Mutsila and the first respondent the Municipal Gratuity Fund (the Fund), a defined contribution pension fund established and registered in terms of section 4 of the PFA. The second respondent was the Adjudicator, while Pension Justice NPC, a public interest non-profit company, registered under section 21 of the Companies Act, was admitted as a friend of the court. The events leading up to the decade-long debacle were briefly outlined too.
Married with five children, but…
Mutsila was married to Takalani Mutsila (the deceased) in terms of a civil marriage on 8 December 2003. The deceased died in a workplace accident on 15 December 2012, leaving his partner and five children whose ages (in April 2014) ranged from nine to 23. All of the children were learners and dependent on their parents when the deceased died. The deceased was a member of the first respondent, with a death benefit to the value of R1,614,434.86 available for distribution to his dependants.
At this juncture, what should have been a plain vanilla distribution by the Fund to the deceased’s dependants took an unexpected turn. The reason is the Fund had received two claims for the death benefit: one from the applicant and her five children, and the other from a Dipuo Masete, “who submitted documentary proof that she and her two children had been listed by the deceased as beneficiaries of a life policy of the deceased, and that the deceased had made regular payments into her bank account.”
The applicant objected to the inclusion of Masete and her two children in the proposed distribution report, produced by the Fund on 7 March 2014. Despite this, the trustees of the board of the Fund resolved to distribute the pension benefit of the deceased in the following manner: 22.5% to Mutsila, and 27.5% to Masete, whilst the children’s benefits varied between 2.5% and 14% of the total benefits, depending on their respective ages.” Overall, Masete and her two children received 52.5%, with the balance going to the applicant and her five.
Something seemed amiss
Upon investigation, the applicant learned that Masete was married to another man in terms of customary law, and that he was the biological father of Masete’s two children. The applicant filed a complaint with the Adjudicator on or about 9 May 2014, per section 30A of the PFA. The Adjudicator finalised the complaint and issued a determination on 8 September 2014, setting aside the Fund’s decision and instructing the Fund to re-investigate and effect an equitable distribution of the death benefits.
Somewhat bizarrely, the Fund then went to the Pretoria High Court, seeking a “declaratory order that pursuant to the death of the deceased, it had conducted a thorough investigation to determine the deceased’s beneficiaries to enable it to make an equitable distribution of the deceased’s death benefits in accordance with section 30C(1)(a) of the Act.” The Fund sought to have the PFA’s 8 September determination set aside on the grounds it had done the legwork before distributing the benefits.
The High Court dismissed this application with costs on a punitive scale on 18 June 2018. To quote from its decision: “It is apparent from the report of the CEO upon which the decision of the board of the Fund was dependent that there was no diligent investigation.” The Fund appealed to a full bench of the same court, with leave from the Supreme Court of Appeal (SCA). At this point, dear reader, you can already get a sense for why these matters take so many years to resolve.
Too many provisions to trip up over
The full bench of the High Court was having none of it, again dismissing the Fund’s appeal with a punitive costs order on 9 November 2021. Quoting from the CC ruling, “the Full Court concluded that the Fund was derelict in its failure to conduct a thorough investigation. Thus, the Fund’s decision regarding the distribution of the deceased’s death benefit was not in accordance with the provisions of section 37C(1)(a) of the Act.” The Fund was then granted special leave to appeal to the SCA.
You can only shake your head at the dogged determination on display here. Again, reading from the CC decision, the Fund contended (1) that the PFA did not have jurisdiction to determine Mutsila’s original complaint and (2), that since it was not granted an opportunity to deal with the merits of that complaint, the ‘hear the other side’ rule was not complied with. A few more years flashed by, until 31 July 2023 when the SCA set aside the Adjudicator’s decision and, in effect, upheld the death benefits distribution decision taken by the Fund. But why?
The reason was unpacked by the CC over a handful of paragraphs, but broadly, “the Supreme Court held that the main objective of the Adjudicator, in terms of section 30A(3) of the PFA, is to dispose of complaints such as the one lodged by the applicant in a procedurally fair, economical and expeditious manner”. The SCA decided the Adjudicator had overstepped by not allowing the Fund an opportunity to respond to Mutsila’s original complaint, contrary to the principles of natural justice baked into section 30F of the PFA.
Going ‘all in’ on the legal process
The applicant then approached the CC, which agreed to hear the matter because it raised arguable points of law of general public importance, including the proper interpretation of section 37C of the PFA and the duties of a retirement fund when determining dependency. The CC also noted that this was the first time it had been asked to interpret section 37C, and that its decision would affect the wider retirement fund industry, including many vulnerable dependants.
Unexpectedly, the CC upheld part of the Fund’s argument. It agreed that the Adjudicator had acted irregularly by not giving the Fund a proper opportunity to respond to Mutsila’s complaint. But it went further, finding that the Fund had also failed in its statutory duty to conduct a proper investigation before deciding how to distribute the death benefit. Trustees must actively investigate and verify dependency, rather than rely on nomination forms, affidavits or other untested claims (FAnews’ emphasis).
The court settled an important point of law in the process. Factual dependency must be determined as at the date of the member’s death, with changed circumstances considered only at the equitable allocation stage. There is no requirement that someone must still be a ‘beneficiary’ when payment is eventually made. With this in mind, the court set aside the decisions of the High Court, the full bench, the SCA, the Adjudicator and the Fund.
Death benefits distribution Round II
It ordered the Fund to start over, identifying dependants and making an equitable allocation based on the facts as they stood on 9 April 2014. This exercise must be completed within three months, and the Fund must pay the applicant’s legal costs. And so, after more than a decade of legal skirmishes, the dispute is back where it began, in the hands of the Trustees, who now have a second stab at getting things right.
Writer’s thoughts:
I was quite taken aback that a beneficiary versus pension fund matter ended up winding its way through all of the courts in our land, especially when the triggering issue seemed so clear cut. What is your take on this death benefits courtroom debacle? Did the CC get it right? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
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