Why you should always name your beneficiaries

A valid nomination of beneficiary form completed by a member is nonnegotiable to ensure the speedy payment of death benefits to the intended beneficiaries.

Without an up to-date form, determining who is entitled to the benefits could take much longer and some beneficiaries could even end up being excluded.

The nomination form is relevant to both group life assurance policies and group funeral policies, with some important distinctions.

Members of retirement funds are typically covered for death benefits through a group life assurance policy.

If this policy is owned by the retirement fund, it is referred to as an “approved” benefit policy; if it us owned by an employer, it is known as an “unapproved” benefit policy.

In the case of an “approved” policy, the deceased member’s accumulated savings, plus the death benefit, are paid to the member’s beneficiaries as a fund death benefit.

Section 37C

The payment of these benefits is subject to Section 37C of 9 distribution – for example, a child born out of wedlock.

Section 37C of the PFA does not apply to “unapproved” policy benefits, except where the deceased member also has savings accumulated in the fund.

In such cases, the death benefit due from the policy is dealt with slightly differently to the fund death benefit.

For a benefit payable under an employer-owned group life policy, a member may nominate anyone whom they wish, including nondependents, and payment will be made accordingly, strictly per the details in the completed nomination form.

But if there is no valid nomination form, the insurer is required to pay the “unapproved” policy benefits to the deceased’s estate, or according to the the Pension Fund Act (PFA), which requires the fund trustees to determine who the beneficiaries are.

The trustees will then distribute the benefit in an equitable manner, with the financial dependency of the beneficiary one of the main factors considered.

A completed form assists the fund trustees in identifying the member’s beneficiaries. However, the ultimate decision on who to distribute the death benefit to, and in what proportion, lies with the trustees.

If there is no valid nomination form, the trustees will conduct their investigation without any consideration for the deceased’s wishes.

This can delay both the investigation process and the payment of the death benefit. In the worst case, a dependant may be omitted from the written instruction by a person authorised by the Master of the High Court.

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Payment is timeously

For both approved and unapproved policies, having a valid beneficiary form makes it easier for death benefits to be paid timeously.

When the main member of an employer-owned funeral benefit policy dies, the benefit is also paid out as instructed in the signed nomination form. If absent, the payment will be made to the deceased’s estate. Payment of the benefit cannot be made to the employer or any other person with control over the deceased’s affairs.

When preparing for unforeseen circumstances such as death, the main priority is that retirement fund members can care for their families and ease the financial burden on them.

Having members complete the nomination of beneficiary form (and keep them updated) is the best way to ensure members can take care for their loved ones.

Group life assurance and group funeral policyholders must make sure that their nomination forms are to prevent their intended beneficiaries from facing financial hardship upon the policyholder’s death.

READ MORE: A last will and testament is one of the best gifts you can leave behind for your family

-Jubane is a customer service specialist at Liberty Consultants and Actuaries