Can I contribute to a second pension fund that will provide for dependants after I die?

You have the option of using either a retirement or living annuity.

I have not been able to find advice for my situation. I am already retired but there is no provision from my retirement fund for dependants/spouse as I was single/no dependants at my retirement date. Upon my death, the pension falls away.

I retired in 1999 (early retirement due to ill-health at 35). I receive a pension from Telkom Retirement Fund. I still have no dependants and I’m unmarried. 

I am still relatively young (56). If I get married or have dependants, what could I do in terms of providing a benefit for them after my death? Can I contribute to a second pension fund, providing for dependants/spouse? Or some other kind of fund.

Providing for your loved ones upon your death is very important, and with sound estate and tax planning you are able to ensure that they are adequately provided for in the event of your passing. There are a number of steps that you can take to get your affairs in order to ensure that any potential future dependants and/or current dependants are provided for.

The first important document that you should review is your last will and testament. Having a valid will in place will ensure that your assets are distributed in accordance with your wishes. Not having a valid will in place means that your estate will be devolved as per the Intestate Succession Act. Some of the difficulties that could arise during an intestate scenario include lengthy processes and additional costs, uncertainly from your loved ones on what your wishes were, and no certainty regarding the appointment of a guardian for your minor children or their inheritance being placed in the Guardian’s Fund, among other things. You are able to nominate a testamentary trust to receive the funds that you would intend for your children to inherit from your estate.

Your last will and testament will determine what happens to the assets in your estate.

The next step is to review your current investments and policies to understand who the nominated beneficiaries are and how the funds will be distributed.

If you have any life policies, you are able to nominate a beneficiary to receive the funds directly without it being paid into the estate.

As life policies that are not paid to a nominated spouse will be deemed property in your estate and should estate duty be payable, it can be redeemed from the nominated beneficiary in proportion of the estate duty liability.

As you are not currently employed, you would be able to contribute towards a retirement annuity to provide for a future pension.

One of the benefits of a retirement annuity is that the fund is required to provide for your dependants upon your death. The distribution of the proceeds would be dealt with in terms of Section 37C of the Pension Funds Act. In terms of Section 37C, the trustees of the retirement annuity fund are duty-bound to ensure that the proceeds are distributed to your financial dependants at the time of your passing. While you are able to nominate a beneficiary to receive the proceeds, the nomination will be considered as a guide but is not enforceable.

On the other hand, if you have a living annuity investment, you are able to nominate a beneficiary to receive the funds. The proceeds will be paid directly to the nominated beneficiaries who will have the option of taking the proceeds in cash or continuing to receive an ongoing income subject to different tax consequences.

To answer your question, while a retirement annuity fund is a wonderful savings vehicle with the added advantage of being a great estate planning vehicle, the decision to start saving in this manner should be done with a full view of your investment goals and financial portfolio.

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