Search Results for “beneficiary fund”

Source: Beneficiary fund

A beneficiary fund is defined as a pension fund organization in the Pension Funds Act No.24 of 1956 of South Africa, as amended in 2008. A beneficiary fund is a uniquely South African entity designed to accept and administer lump sum death benefits allocated in their discretion by retirement fund trustees to the minor dependants of deceased retirement fund members, as set out in section 37C of the Act. Major dependants are also eligible to accept section 37C death benefits.
Beneficiary funds were introduced in January 2009. Advantages of beneficiary funds are that they are cost effective and tax effective, and offer institutional investment returns. Beneficiary funds are taxed in the same manner as retirement funds in South Africa, that is no tax is paid in the fund. Furthermore, any payment out of a beneficiary fund, whether capital or income, is tax free.
Beneficiary funds are designed to protect the assets of those who receive death benefit payouts. They play an important social role in Southern Africa, particularly for single-parent and child-led households, allowing minor children to stand a better chance of completing their education if their assets are managed in a beneficiary fund vehicle which is protected under the Pension Funds Act and overseen by a board of trustees.
Any retirement fund member, regardless of their level of financial sophistication, can consider the use of a beneficiary fund in estate planning as an alternative to a testamentary trust, by stipulating on their pension fund nomination form that the trustees consider the use of a beneficiary fund in the event of their death.
Traditionally, beneficiary funds were regarded as a vehicle for children's assets but the concept has evolved to become more relevant and attractive to a broader market from a tax savings point of view. The education aspect has remained a dominant benefit of beneficiary funds however, allowing the payment of a monthly income to finance a child's entire education through to tertiary level and beyond. When the member turns 18, the beneficiary fund will engage with the member to determine the best use of his or her remaining funds into the future.