When you belong to a company retirement fund and have group life benefits, you are always asked to complete a nomination of beneficiaries form, giving your nominated dependants and beneficiaries. It is important to note that a nomination of beneficiaries form is different to your Will.
In the event of your death while still in the service of your employer, the form will be used by the trustees as a guide in distributing your retirement and death benefit amongst your dependants and nominees. The trustees have a duty to identify all qualifying dependants and nominated beneficiaries when a member of a retirement fund dies. In terms of Section 37C of the Pension Funds Act the trustees then take into account relevant circumstances when dividing your lump sum death benefit.
This means that although you advise the Trustees via the form as to who you would like to see receive a portion of the death benefit, the final decision ultimately rests with them on who will receive a portion of the benefit and in what proportions. Further your Will can’t specify how your fund’s death benefit must be shared out.
The trustees of your fund are responsible for sharing out the death benefit. They are guided by the rules of the fund and Section 37C of the Pension Funds Act.
The trustees must look at the following people when sharing out the death benefits:
The trustees must also take into account:
Although the trustees must follow the rules laid out in Section 37C, they have a choice about the amounts of money shared out to the people who receive it. They can also decide what part of the benefit needs to be shared by the dependants and nominees.
When making this decision, the trustees, must make sure that all steps have been taken to identify, trace and contact all the people who could qualify as your dependants or nominated beneficiaries.
Once the trustees have identified the beneficiaries, they must divide the death benefit between them fairly, based on the circumstances that apply to each case.
To assist the trustees in this process, you should complete a nomination of beneficiaries form indicating your dependants and/or nominated beneficiaries. Remember that this form is only a guideline for the trustees – they are still responsible for deciding who will receive the benefit.
If you have not completed or updated a nomination of beneficiaries form and your family members are difficult to contact, there can be a delay of up to 12 months before your benefits are paid out – and this is a long time for your dependants to be without income.