Expert warns against not having a will when you have funeral benefits
Here are the dangers of having a pension or provident fund with a funeral benefit when you don't have a will.
Wayne Paries, a financial advisor, addresses common errors that people make when taking out a Pension or Provident Fund that offers funeral benefits.
A pension fund is a fund in which an employer, and often the employee, make monthly or frequent contributions which is invested in order to pay an employee when they retire.
Old Mutual states: “A provident fund is the same as a pension fund, but prior to 1 March 2021, it differed in that when you resigned or retired, you could take the entire sum as cash, which you’d be taxed on.”
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Some of the pension and provident funds also offer funeral benefits.
Wayne Paries, warns against not having a will when taking out a pension or provident fund.
“The recent changes to Schedule 2 of the Insurance Act 18 of 2017 (“the Act”) requires that, upon death of the main member, all insurers must pay funeral benefits only to valid nominated beneficiaries,” says Wayne.
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“If no valid nomination was made, the funeral benefits must be paid to the deceased estate,” says Wayne.
He adds that:
- The employer cannot be nominated as the beneficiary.
- Insurers cannot refund advance payments made by employers.
- A specific nomination for the funeral benefit must be made, the nominations for retirement fund and/or unapproved life cover cannot be used for this purpose.
- Paying to the estate means that the intention of covering the costs associated with a funeral will not be achieved.
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Paries says employees who took out pension or provident funds with a funeral benefit need to:
- Arrange that employees nominate a beneficiary for their funeral benefits.
- Inform employees that they should preferably not nominate a minor child as beneficiary, given that the intent of the funeral benefit is to contribute towards funeral costs.
- Store the completed and signed nomination forms securely on the employees’ records.
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