YOU DON’T HAVE THE LAST WORD

As a member of a retirement fund, you have no doubt nominated one or more beneficiaries – and your fund probably asks you to review your nominations regularly. But did you know that you don’t have the final say in the matter?

The allocation of your fund’s death benefits is entirely at the discretion of the trustees, and section 37C of the Pension Funds Act compels them to consider beneficiaries not nominated by you, Kobus Hanekom, the head of strategy, governance and compliance at Simeka Consultants & Actuaries, says.

“The golden rule to remember when nominating beneficiaries is this: the trustees will not be able to honour and respect your nomination if persons dependent on you will be left destitute as a result,” Hanekom says.

If you nominate as a beneficiary a person who is not dependent on you and you are survived by a spouse or life partner who is dependent on you, it is likely that the trustees will override your nomination. This is unless you provide them with further information and explain why the dependant will not be left destitute.

As Muvhungo Lukhaimane, the Pension Funds Adjudicator, said in a recent determination, a nominee is not entitled to a death benefit by virtue of having been nominated. The fund’s board of trustees is not bound by the nomination form you completed; the form serves merely as a guide to assist it when it exercises the discretion granted by the Pension Funds Act.

Hanekom cites an example where a fund member nominated her son to receive her entire death benefit. After her death, an investigation by the trustees found that she was survived by a life partner who was financially dependent on her, and a portion of the benefit was allocated to him.

“The son argued that the full death benefit should have been paid to him in accordance with his mother’s nomination. He said his mother’s life partner of 30 years (who happens to be his father) abused his mother physically, emotionally and verbally. This man relied on and exhausted his mother financially with demands for liquor and food.

“Once the trustees identify a person as a dependent, however, they are duty bound to consider the person for a benefit allocation. Whether or not the dependant is worthy of receiving a benefit is not taken into consideration at all.”

So what can retirement fund members do to ensure their wishes are taken into account when their death benefits are allocated?

Hanekom says the best you can do is to provide enough information and guide the trustees to understand their planning and strategy.

“You should, therefore, not stop at making a beneficiary nomination. You should write a motivation (on the nomination form or an attachment) that will assist the trustees to see the full picture and guide them to an outcome aligned with your own objectives,” he says.