<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting with Henr\u00e9 Prinsloo, head of employee benefits at Momentum Corporate. Henr\u00e9, appreciate the time today.<\/p>\n
Most people assume that if they name a beneficiary in their pension fund or in their will, that\u2019s where the money will go. But this is not always necessarily the case, as something in a case with the Pension Funds Adjudicator recently indicated.<\/p>\n
HENR\u00c9 PRINSLOO: Indeed, Simon. Thanks for having me. Yes. Unfortunately this is quite a common occurrence where people\u2019s wishes at the time that they draft either they will or their beneficiary nomination, don\u2019t play out in reality.<\/p>\n
The reason for this is really the complexity around retirement-fund benefits \u2013 and death benefits in particular. I think we\u2019ve mentioned Section 37 here a few times. One of the most hotly discussed and debated court actions, complaints about a section of the Pension Fund Act. So there is a lot of complexity around it, unfortunately.<\/p>\n
SIMON BROWN: The key point is that the fund trustees need to ensure that funds benefit equitably, with a primary focus on dependency.<\/p>\n
Now, equitability perhaps is an easy part; dependency perhaps is the harder part. But they\u2019ve got a duty to survivors, not just to the will.<\/p>\n
HENR\u00c9 PRINSLOO: Indeed. So the act is very clear on the requirements of the Board of Trustees. In fact, it\u2019s an incredibly difficult job to do a full investigation to understand somebody\u2019s situation. This is where I think it gets a little complicated \u2013 where there are different types of dependents.<\/p>\n
There are so-called \u2018legal dependants\u2019. The easiest example of this is someone that would legally be required to maintain \u2013 for example, a spouse or your child.<\/p>\n
Then you get what are called \u2018factual dependents\u2019. This is where it gets a bit murky because a factual dependent is anybody who is supported by the beneficiary or could have been supported by them in the future had they not passed away.<\/p>\n
This is where we often find a lot of disputes and debates. In fact, sometimes people don\u2019t even know that the person who passed away had other factual dependents. There have been instances of people having other life partners, other families that their primary family didn\u2019t even know about. So it gets quite difficult. The trustees need to take all these people into account.<\/p>\n
On top of that, on top of your dependants, there are the so-called nominees. When you join a retirement fund, you\u2019ll fill out a nomination form for beneficiaries, and you\u2019ll put in there where you would like your money to be allocated on unfortunate passing.<\/p>\n
So the trustees really have quite a tricky job to put all of this together, to do a full investigation, to understand who the dependents are, factual and legal, and then also to take into account their circumstances, such as their current financial circumstances, their ability to work, and what level of dependency they had on the on the deceased.<\/p>\n
From that they then have to make an equitable allocation. That\u2019s obviously in itself is a complicated matter.<\/p>\n
SIMON BROWN: I take your point. This is not malicious. I like to point around the fact of the legality. I get a child, a spouse; but I could have, let\u2019s say, a friend to whom I give R1\u00a0000 a month to pay for petrol for them to get to work every day. That is, I\u2019ve been supporting them. This is factual \u2013 they could come and say: \u2018Hey, we need that R1\u00a0000. It\u2019s important\u2019.<\/p>\n
HENR\u00c9 PRINSLOO: Absolutely. When we talk of things like friends, a family, or sort of children born out of wedlock, children that belong to a life partner who aren\u2019t your biological children would be \u2018support\u2019. So it gets quite complicated.<\/p>\n
And I think where it gets really tricky is that the trustees really have a duty to perform a thorough investigation. They have to rely on information which is often provided by the various dependents, various documentation.<\/p>\n
It\u2019s really, really important that your documents are in order. So it\u2019s not only your beneficiary nomination form or your will, but also to take all the different types of benefits into account, because what makes it a slightly murkier is that pension-fund benefits are treated differently from other types of benefits that would be provided, for example, from a different life policy or a funeral policy that\u2019s not provided by the fund.<\/p>\n
So making sure that there\u2019s a sort of unified place where somebody knows how all these things interlink and work together, and who all the people are that are in your life. It\u2019s quite important to have something like that in place.<\/p>\n
SIMON BROWN: Is that it? My next question was going to be: How does a member sort of protect their intentions, because the key point is, I\u2019ve passed, I\u2019m no longer available. It\u2019s going to be, I suppose, documentation. It\u2019s going to be don\u2019t try to hide things. And be upfront, I suppose.<\/p>\n
HENR\u00c9 PRINSLOO: Absolutely. I think, sadly, maybe that\u2019s where some of the really heartbreaking cases come through, where people have these sorts of dual lives where they have other partners and other children, and they haven\u2019t told anyone; nobody knows about these people. These other people come out through the process.<\/p>\n
So I think definitely try to have all your documentation in place, make sure that you have a will.<\/p>\n
Estate planning is sometimes seen as something for the wealthy but, when it comes to Section 37C [of the Pension Funds Act], the death benefits, for anybody across the spectrum the benefit is quite meaningful.<\/p>\n
Often we see clients with three, four or five times the annual salary as a death benefit. No matter how much you\u2019re earning, that is going to be a decent sum of money and it\u2019s going to bring with it a lot of complexity. So make sure that you understand what it all means in terms of the different benefits that you have, different policies you may have with different employers or different funds, and then make sure that you have somebody who\u2019s able to help you pull it all together.<\/p>\n
I think that\u2019s something like having a \u2018life file\u2019, where all your really important documents are and everything is set out. If you have children, even if from different relationships, make sure you have copies of their IDs \u2013 maybe even a little family tree or a story that explains who you are and who all these people are in your life. For a board of trustees to go and try and figure out who was your life partner, who is your spouse, which of your biological children are there, and who is dependent on whom can get quite murky.<\/p>\n
So try to simplify it as much as possible to give a bigger chance of your actual will and your actual intent being followed after your passing.<\/p>\n
SIMON BROWN: I like that \u2013 a \u2018life file\u2019. I\u2019ve always called it \u2018A letter for when I\u2019m dead\u2019. A \u2018life file\u2019 is a much friendlier phrase.<\/p>\n
We\u2019ll leave it there. Henr\u00e9 Prinsloo, head of employee benefits at Momentum Corporate, appreciate the time.I am running a few minutes late; my previous meeting is running over.<\/p>\n
Listen to the full MoneywebNOW podcast every weekday morning here.<\/p>\n
#Beware #Pension #payouts #ignore<\/p>\n","protected":false},"excerpt":{"rendered":"
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