They need to be made aware that there’s no guarantee that the nominated beneficiaries will receive a cash payout as per the wishes of the deceased.
Retirement and provident funds are regulated by section 37C of the Pension Funds Act; this section gives the fund’s trustees the final say on how the death benefit is allocated among the beneficiaries.
“By law, the trustees of the retirement fund can override the wishes of the deceased; this is despite the fact that the deceased may have nominated beneficiaries of their choice. The trustees will be guided by the member’s wishes, but they will make the ultimate decision on who receives the benefit and who does not," explains Preenay Sathu, channel head at FNB financial advisory.
To avoid frustration, retirement fund members must update their beneficiaries on a regular basis, and ensure that all individuals that are financially dependent on them are nominated. “Upon death, fund trustees have up to 12 months to identify the dependants of the deceased. Should it be found that there’s an individual who is financially dependent on the deceased, that person can be allocated a death benefit even if they were not nominated," he says
Furthermore any person listed as a beneficiary is not necessarily entitled to a payout; the trustees have a responsibility to consider the following:
A common misconception is that if the fund member has his or her wishes stated in a will in relation to a fund death benefit, such desires will be followed. The trustees of the fund are not bound by the deceased member’s will, therefore it’s important for their financial advisor or employer to inform members of these conditions, so that their wishes can be carried out.
