Most people have retirement funds, which may come from their employer as a pension, provident fund or retirement annuity. This includes a retirement annuity that you pay by yourself and a preservation pension or provident fund that you invested in when you resigned.
The board of trustees manages these retirement funds, which are governed by specific rules and legal requirements. When a member of a retirement fund dies, there is a process that some are unaware of: the provisions of section 37c of the Pension Fund Act, which govern the death benefit. As a member, you need to know that your retirement fund death benefit will not form part of your estate. This means that you can’t include your retirement funds in your will.
READ: Many pensioners are annoyed about higher monthly tax deductions
Do you know who will benefit from your retirement savings? Most people will say yes because they have submitted nominated beneficiary forms to the administrators of their retirement funds. Unfortunately, submitting a nomination form does not guarantee that the money will be paid to the people you nominated because your nomination form is only a guideline for the trustees and is not final.
The trustees make the final decision, and it can take them up to a year to decide and finalise the process. This is a legal waiting period in place to allow untraced dependents to come forward.
READ: Podcast | My Money: How to save for 35 years of retirement in 40 years of work
A nominee will automatically qualify for the percentage assigned to them by the nomination form by virtue of their nomination. However, the nominee will only receive this portion of the death benefit if the following conditions are met: there are no other existing dependents; the deceased member’s estate is solvent; the nominee did not cause the death of the deceased member and the nominee is still alive when the board of trustees makes its decision.
READ: Scammer uses Mpumalanga MEC’s name to demand money
The trustees must identify and locate all the deceased member’s dependents. They will investigate who financially depended on the deceased member, and if you send money to anyone via eWallet or cash transfer and have proof that you were financially supporting them, they may be eligible for a share as well.
READ: Beware of buying to rent
Let me share a typical scenario: A member is married with children and has a second partner. When this member dies and the other partner was receiving financial support from the deceased member at the time of their death, the other partner may be entitled to a portion of the money. If the other partner keeps track of the eWallet or cash transfers and can provide proof to the trustee, he or she may be eligible. Remember that your bank statement can also serve as proof because it will include the other partner’s cell phone number, which the trustees can use to verify this information. As a result, be careful about who you send your eWallet or cash transfers.
Nonhlanhla Nxele, CFP®, founder and CEO of Esteemed Financial Solutions
