SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS
By Dolana Conco, Regional Executive at Alexander Forbes
Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.
Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.
If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.
What retirement fund members need to do
- Keep your ‘Who needs financial support when I die?’ form up to date
This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to 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 someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.
- Submit the correct documents
The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:
- a certified copy of the death certificate
- the identity document or passport of the deceased member
- a copy of a pension-backed housing loan (if applicable)
- proof of the extent of any financial dependency of the beneficiaries
What your retirement fund needs to do
The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:
- Age of the beneficiaries
- Relationship to the deceased
- How financially dependent they were on the deceased
- Their financial affairs
- Their future earning potential and prospects
- The total amount of the retirement saving to be distributed
The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.
If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.
There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.
Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.
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