The Sanlam Benchmark Survey for 2018 reveals the following startling statistics.
16.1 million people are employed in SA.
Just over 48% of employees have access to retirement benefits.
Contribution levels have declined to pre-2013 numbers. This is a dire figure indeed, if inflation is taken into account.
The average contribution to death benefits (life cover) per member is 1.45% of salary.
Forty-five per cent of risk benefits payable to employees – or their families – are provided by the retirement fund.
On average, an employer contributes 9.91% of the salary bill to retirement fund benefits. This clearly represents a great deal of money!
The death benefits payable range from one times the annual salary to seven times the annual salary – depending on job status and other factors. In addition to this sum of money, the retirement benefit will also be paid out. Most families would surely never have had so much money available to them before.
Have you as an employer considered the process that takes place on the death of an employee? This is a traumatic time for his or her family and a loss for the business, as well.
Many employees leave behind children under the age of 18, who therefore cannot take care of themselves, let alone manage the sudden inflow of a substantial amount of money into their family. Often these children have no surviving legal guardian, or if they do, the guardian or caregiver is not skilled enough to manage these funds properly to the benefit of the children.
A beneficiary fund is defined as a pension fund organisation in the Pension Funds Act No. 24 of 1956 of South Africa. It is designed to accept and administer lump sum death benefits allocated at their discretion by retirement fund trustees to the minor dependants of deceased pension and provident fund members, as set out in section 37C of the Act.
It is the perfect way to ensure the funds are looked after for the children of the former employee. The fund is tax exempt and subject to strict regulatory governance.
Instead of shouldering this burden yourself, consider entering into an agreement with an experienced beneficiary fund administrator, such as Sanlam Trust.
Article written by David Thomson, Senior Legal Adviser, Sanlam Trust