In this month’s edition, we take a look at what happens to your retirement savings should you pass away.

Death is a gloomy topic and no one really wants to engage in it. It’s an unconventional topic that is culturally and traditionally frowned upon. This is because the death of a loved one is one of the most difficult experiences a person can go through.

Although this is the case, in the Retirement Funds industry, it is extremely important for a person to ask themselves what will happen to their savings should they pass away. As a member of a retirement fund, the trustees of your fund have a legal obligation to ensure that your rightful dependents get your retirement savings (including any group life benefits that may be attached to your fund).

According to section 51 of the Retirement

Funds Act 2022, on the death of a member of a retirement fund, a member’s death benefit will be paid to the dependents or nominees designated in writing to the fund by the member before the member’s death, in such portions as the trustees may deem necessary. This, to a large extent, requires the member to state prior to their death how their benefits are to be distributed as guidance to the trustees of the fund. A member can do this by competing the nomination of Beneficiaries form.

Nomination of Beneficiaries form and its importance

Following the death of a member, it is important that your loved ones do not worry about finances while grieving the loss of a loved one. Even though it’s not a will, a nomination of Beneficiaries form is so much more important than anyone thinks. It is an indication to your trustees on how you wish your retirement savings to be distributed.

As mentioned previously, the trustees of your fund are expected to distribute your benefit to all the people who are financially dependent on you, as well as those you want to leave a portion of your death benefit to when you die. The people who depend on you for financial support are called your financial dependents, such as your spouse or life partner, children (of any age), your mother, people you pay maintenance to or anyone else in your life who depends on you financially. If no one is financially dependent on you in any way, you can choose to leave your benefit to your family, friends, charity or church.

Although a nomination of Beneficiaries form is not binding on the trustees in terms of legislation, it gives them an indication of how you would have liked your benefit to be distributed. The most common delays in the distribution of death benefits is where a nomination of beneficiary form is outdated or, sometimes, not even completed. In such instances, the trustees will conduct thorough investigations to determine who, if any, was dependent on you financially. This can be a very daunting task as it involves interviewing those people considered to be close to you to get as much information as possible, to enable the trustees to distribute the benefit fairly.

As a member of a retirement fund, your employer can assist you with what is needed, and even check that you’ve completed the form fully and correctly before submission. These are the documents that are required following the death of a member:

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a certified copy of the death certificate

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the identity documents or passports of the deceased member and all possible dependents

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a completed nomination of Beneficiaries form

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completed claim forms from the insurer (if applicable)

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proof of the extent of any financial dependency of the beneficiaries

Your employer will then submit a death claim form to Alexforbes and the insurer. The human resources department will guide your family during the claims process. However, if you are a member of an individual member retirement fund or an individual annuity, you must keep an updated record of your nomination of beneficiary form with your administrator. They will assist your family with the death claims process in the event of your death.