LEGAL NOTE – FEBRUARY 2025 : The Importance of Completing Nomination of Beneficiaries Forms

Life events, such as untimely death, occur as part of our normal lives and we seldom have any or very little control to prevent such life events. The unexpected passing of a loved one usually causes great grief and disruption for the dependants that are left behind. This can be aggravated if proper financial planning and documentation are not valid and up to date. Legal problems quite often arise when the required documentation is not completed correctly, kept up to date or kept in a known and safe place. This normally causes significant delays and frustration for the dependants who are in financial need of the estate to be finalised, assets to be distributed and short-term cash flow to be made available.

The Nomination of Beneficiaries Form is much more important than anyone thinks – even though it is not a last will and testament. The trustees are expected, by law, to 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 or beneficiaries. Some examples are your spouse or life partner, children (of any age), your parents or family, people you need to pay maintenance to or anyone else in your life who depends on you financially.

Not having a valid and up-to-date Nomination of Beneficiaries form can cause significant delays in the distribution of death benefits payable by retirement funds (Section 37C of the Pension Funds Act, No. 24 of 1956) and death benefits payable by unapproved group life insurance policies (Schedule 2 of the Insurance Act, No. 18 of 2017).

The purpose of a Nomination of Beneficiaries form is to list or nominate dependants and/or beneficiaries, and to allocate your lump sum death benefits to them. In the case of a death benefit payable from a retirement fund, the distribution of your death benefit to dependants and/or beneficiaries needs to be done in accordance with the requirements contained in Section 37C of the Pension Funds Act. This means that the Trustees will use this list of nominated dependants and/or beneficiaries to assist/guide them in deciding how and to whom, your death benefit will be distributed. The Trustees are not mandated to apply the information provided on this form for the distribution of the benefit, but they will consider your nominations, and they will have the final discretion to ensure that the benefit is allocated in an equitable manner.

The absence of a valid Nomination of Beneficiaries form in respect of your death benefit from the retirement fund will certainly result in a payment delay of the often much-needed benefit. In some instances, owing to family composition, the absence of a Nomination of Beneficiaries form may result in the proceeds of the death benefit having to be transferred to the deceased member’s estate. This could have been prevented by the completion of a clear and up-to-date Nomination of Beneficiaries form.

When it comes to the payment of a lump sum death benefit from an unapproved group life insurance policy, the situation can be complicated further by Schedule 2 of the Insurance Act. This Act stipulates that the death benefit is payable to a “beneficiary” only. The provision previously afforded an employer the discretion to determine the beneficiaries and their allocations from unapproved lump sum death benefits and/or funeral benefits, however, this is no longer allowed. All insurers are obliged to comply with this amended requirement. This implies that, where a death claim from an unapproved death benefit and/or funeral benefit, is submitted without the existence of a validly completed Nomination of Beneficiaries form, the insurer will have no other choice than to pay over the benefit to the deceased’s estate. Apart from other implications, this will, most likely, have an impact on estate duty, related additional costs and time delays, which could have been prevented if a valid Nomination of Beneficiaries form existed.

In view of the above, all members of retirement funds and group life insurance schemes are urged to ensure, without delay, that they have completed separate Nomination of Beneficiaries forms for their retirement fund and group life insurance scheme(s). The relevant forms are available from your Human Resources Department of your company or your Fund Consultant.

By ensuring that you have valid Nomination of Beneficiaries forms, you will prevent a lot of unnecessary distress for your loved ones in the event of your untimely death.