What happens to your pension fund when you pass away?
Regardless of what you stipulate in your will, your pension fund money will be distributed according to the kind of fund and its rules.
You have contributed to your pension fund all your life, but do you ever think about what will happen to your pension or the rest of it if you are already retired when you pass away?
When a loved one passes away, finances are the last thing families should have to worry about, Siphamandla Buthelezi, head of platforms at advisory firm NMG Benefits, says.
'Yet, time and again, grief is compounded by confusion and conflict over pension fund payouts.
'The truth is, ensuring what happens to your pension fund after you die is not as simple as naming a beneficiary or drafting a will. Legislation, cultural nuances and the issue of 'dependency' all play a role in who ultimately receives what.'
He says the type of pension or group life fund you belong to, whether approved or unapproved, directly affects how your death benefits are distributed.
'In the case of unapproved pension or group life funds, these are not governed by Section 37C of the Pension Funds Act, meaning the employer or the terms of the policy determine who receives the benefit.
ALSO READ: This is what a divorce will do to your pension fund
Pension fund paid out to those you chose as beneficiaries
'To ensure fairness, employers typically follow the most recent beneficiary nomination form you completed. However, if you did not update your beneficiary nominations, there is a risk that the benefit may go to people you no longer intended to support after your death.'
For this reason, Buthelezi says it is especially important with unapproved funds to regularly update beneficiary nominations to ensure your wishes are accurately reflected and honoured.
He points out that the rules are different in the case of approved pension funds. 'Death benefits are distributed in accordance with Section 37C of the Pension Funds Act.
'This means the fund's trustees are legally obligated to investigate and identify the deceased member's dependents and/or nominated beneficiaries and must then allocate the benefit based on financial dependency and other relevant legal considerations.
'The final decision rests with the trustees, not necessarily with the nominations you made. In these cases, trustees of the funds are legally obliged to prioritise financial dependents over nominated beneficiaries.
'When a member of the approved pension fund passes away, the trustees begin an investigation into who financially depended on the deceased and to what extent.
'These investigations often include a deep dive into the deceased's financial records, looking for recurring payments such as rent, school fees, or allowances.'
ALSO READ: South Africa's real retirement age? 80!
Pension fund paid out to people who depend on you financially
Buthelezi points out that this means that even if you have named beneficiaries in your pension fund policy, they may receive nothing if they were not financially dependent on you.
Conversely, someone you never intended to benefit, such as a former partner or someone you are having an affair with, could end up receiving a significant portion of your pension savings.
'It is a hard truth, but financial dependency trumps relationship in the eyes of Section 37C of the Pension Funds Act.'
He says financial dependency extends to children born out of wedlock or any other individuals who can prove financial dependency on the deceased.
In some instances, a wife may even find herself financially responsible for children she never knew existed, especially if she and her husband were married in community of property and he supported these children during his lifetime.
'Having a will is important, but it will not override Section 37C pension fund rules. Your will governs your estate, meaning your assets, investments and personal belongings, but pension funds do not consult your will after you have passed away.'
ALSO READ: Warning! The retirement savings gap is widening in South Africa
Remember this
The takeaway?
'Update your beneficiary nominations regularly and talk to your family about your relationships and commitments.
'We see all too often how spouses only find out how their partners lived and who they supported after the partner has passed.
'But by then it is too late to influence their decisions or safeguard your financial wellbeing.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
5 days ago
- The Citizen
Limpopo DA lays charges over GNT pension crisis
LIMPOPO – On Monday, May 26, the Democratic Alliance (DA) in Limpopo laid criminal charges against the CEO of Great North Transport (GNT) and the Limpopo Economic Development Agency (LEDA), the sole shareholder of GNT. The charges, filed at the Polokwane Police Station, relate to the non-payment of employee pension fund and medical aid contributions. Jacques Smalle, DA Limpopo provincial spokesperson for economic development, environment, and tourism, said LEDA, as the sole shareholder, holds both statutory and fiduciary responsibilities for GNT's financial management. 'The scale of the crisis became clear during an urgent sitting of the Limpopo Portfolio Committee on Economic Development, Environment and Tourism on Friday, May 23,' Smalle explained. 'This meeting, which followed the DA's repeated calls for GNT and LEDA to account, revealed unpaid contributions to three pension schemes totalling R6.78 million and affecting 945 employees. In some cases, employee memberships have already been suspended. If at least R1 million is not paid by the end of May, all memberships could be suspended, potentially resulting in permanent loss of pension benefits.' Smalle attributed the crisis to 'years of corruption, mismanagement, and lack of accountability' at GNT. He added that the company's failure to implement a viable turnaround strategy further deepened its financial troubles. 'The situation at GNT is dire; it has become an unsustainable entity,' Smalle said. 'The charges laid include theft, fraud, and violations of both the Pension Funds Act and the Medical Schemes Act, all of which are criminal offences.' In response to the allegations, Mthunzi Dlamini from LEDA acknowledged the outstanding contributions and said efforts were underway to settle the payments within the week. 'GNT has faced ongoing financial constraints in meeting its obligations,' Dlamini said. 'However, strategic steps have recently been taken, including the procurement of new buses to replace the ageing fleet and the launch of a bus lease programme aimed at increasing operational capacity.' LEDA CEO Thakhani Makhuvha said the LEDA is committed to resolving the issue. 'As the shareholder, LEDA has decided to step in and ensure that all outstanding pension and medical contributions are brought up to date,' Makhuvha said. 'We recognise the severity of the situation and apologise to affected employees. This is deeply regrettable.' At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
The Citizen
04-06-2025
- The Citizen
More than R140 million in salaries paid to suspended government employees
National departments paid nearly R51 million to suspended government employees, while provincial departments spent more than R90 million in the 2024/25 financial year. Government has paid more than R140 million in salaries to employees who have been placed on precautionary suspension during the 2024/25 financial year. This is according to public Service and Administration Minister Mzamo Buthelezi, who was accounting to the National Assembly during the Governance Cluster question and answer session on Wednesday. Buthelezi said as of the end of the fourth quarter of the 2024/25 financial year, national departments paid R50 945 064 to the suspended employees while provincial departments spent R90 469 562. The minister was responding to Al Jama-ah member of parliament (MP) Shameemah Salie, who had asked what the current estimated total cost of ghost employees and suspended employees on the payroll of government was. Ghost employee audit still incomplete Salie also asked what work had been done prior to the Budget Speech to recover funds lost from paying fraudulent salaries. Buthelezi said the total cost associated with ghost workers had not yet been determined. 'This cost will only become known once a comprehensive employee verification process across public service has been completed and the financial implications accurately calculated,' he said. 'However, the Department of Public Service and Administration and National Treasury are jointly leading this exercise, and once the report is finalised it will be shared with the relevant parliamentary committee and this house.' Salie further said the issue of ghost workers had been an ongoing battle for decades and had resulted in millions being lost per yearly. ALSO READ: Gauteng health freezes 66 salaries in ghost employee crackdown 'We urge the minister and all relevant departments to ensure an audit across government and to provide frequent feedback on findings surrounding ghost workers, prosecution of and recovery of funds from these entities,' Salie sad. Buthelezi defends 'bloated' public service wage bill ANC MP Pumelele Ndamase asked what the overall impact of ghost workers was, in which departments they were mostly found and whether Buthelezi's department is actually aware of how ghost employees end up being in the employ of the state. The public service is often accused of being bloated, Ndamase said, while simultaneously struggling to meet the demand of South Africans. In response, the minister said while it is widely believed that the public service wage bill is too high, the department has a different view. 'We do have many vacant posts in the department and many departments who are struggling to even employ because they have a shortage of staff members, because the government cannot afford to pay their salaries,' Buthelezi said. 'So, the issue of a bloated public service wage bill is not necessarily the case, but we do appreciate the fact that we view that as such because our economy is not growing at the rate that it should.' He said the challenges of the country's stagnant economic growth had a bearing on the expenditure where public employees are concerned. Thorough investigation With regard to the departments affected by ghost employees, Buthelezi repeated that there were currently no statistics, but the department is engaged in a thorough investigation. Before posing his question, Rise Mzansi's Stanford Makashule Gana Minister said the 'ghost employees' should be referred to appropriately – public servants who 'give themselves more than one salary'. ALSO READ: R6 million in salaries paid to ghost workers in Mpumalanga 'Trigger-happy managers' Gana finally asked if the Buthelezi's department is considering attaching cost orders to managers who are trigger happy and quick to suspend public servants who don't deserve to be suspended. 'As a department, when it comes to managers who simply suspend employees willy-nilly, we have come up with a directive that says whenever there is an employee that is alleged to have committed a particular offence, instead of suspending that person and continuously get a salary, that person must be transferred to another department or unit,' Buthelezi responded. He said he was not aware of public servants earning more than one salary and that the department is putting systems in place to curb wastage. Redundancy audit Heloise Denner, FF Plus MP, asked if the department had considered or assessed the feasibility of implementing an audit to identify redundant posts within the public service in order to reduce costs. In response, the minister said the department is already putting systems in place to deal with redundancy. He said that the departments need to first consult the Department of Public Services and Administration whenever there's a post to fill. '[This is so that] we look into whether or not there is a need for that particular post or if it means they redefine their organogram,' Buthelezi said. '[They must] also consult with National Treasury to see that there are funds available so that we prevent departments from employing people for posts which do not add any value into the system,' he added. NOW READ: 'It's a scam': Mbalula says Prasa's ghost workers saga to be referred for criminal investigations
The Citizen
02-06-2025
- The Citizen
DA Limpopo lays charges over GNT pension and medical fund scandal
POLOKWANE – DA provincial spokesperson for Economic Development, Environment and Tourism, Jacques Smalle presented himself at the Polokwane Police Station on Monday morning to lay a criminal complaint against the board and executive management of Great North Transport (GNT) for the non-payment of employee pension fund and medical aid contributions. According to Smalle, the board and executive management of the Limpopo Economic Development Agency (Leda) will also be enjoined in this complaint. You might also want to read: Plans underway to resolve GNT pension fund debacle 'As the sole shareholder of GNT, Leda bears statutory and fiduciary oversight responsibilities for GNT's operations and financial conduct. They too must be held accountable and face consequence management,' Smalle explained. According to Smalle, the shocking extent of this crisis was laid bare during an urgent meeting of Limpopo's Portfolio Committee on Economic Development, Environment and Tourism, convened last Friday evening, following the DA's sustained calls for GNT and Leda to appear before the committee to explain and account. It became apparent at the meeting that unpaid contributions to three pension schemes now total R6.78m, affecting 945 employees. In some cases, employee membership has already been suspended. If a partial payment of R1m is not made by the end of May, all employee memberships will be suspended. If the default continues, employees' risk permanently losing their pension benefits. Regarding medical aid contributions, total unpaid premiums amount to R3.21m, affecting 247 employees. You might also want to read: Unpaid provident fund sparks protest by Great North Transport employees All medical aid coverage for GNT employees has been suspended, meaning employees cannot access healthcare services unless they pay out of pocket. 'While undertakings were made at the portfolio committee, and while MEC Tshitereke Matibe indicated that he wished to address the crisis privately and in confidence to the committee, this never materialised. A subsequent statement issued by MEC Matibe, in which he apologised to GNT employees and set out certain actions including placing GNT under administration, was later withdrawn. It is within this context that our criminal complaint to SAPS will be lodged,' Smalle explained. 'We urgently need resolution to the plight facing GNT's employees, and we need to see real accountability and consequence management. If we don't clean out GNT, no turnaround will succeed,' Smalle reckoned. 'In our complaint to the police we call on law enforcement to investigate the conduct of GNT and Leda officials and their board members for theft, fraud, contraventions of the Pension Funds Act and contraventions of the Medical Schemes Act, all of which constitute criminal offences,' Smalle concluded. At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
