A member's full retirement fund benefit share is paid to beneficiaries when the member passes away, as well as any insured group life benefit that may be applicable. The member share represents the member's accumulated value in the fund. It is the total of all amounts transferred for a member from other funds, all contributions made in the member's name, less operating expenses and costs, plus investment returns.

Approved benefits are benefits payable in terms of the fund rules in accordance with the Pensions Funds Act in the event of a member's death and may be subject to tax. The trustees of the fund have the duty to allocate the death benefits to one or more dependants and/or nominees in the proportion deemed fair by the trustees. The person/s nominated on the beneficiary nominated form, as well as other factors, will be taken in account by the trustees before deciding.

If the member's employer arranged for him/her to belong to an unapproved insured group life scheme, this benefit may also be payable through a separate group life scheme insurance policy (i.e., it does not form part of the fund)

Unapproved benefits are benefits payable in terms of a separate group life scheme in the event of the member's death. This benefit is not subject to the Pension Funds Act and is not subject to tax. Benefits payable on death will be paid as prescribed by the group life policy documents.

When a pension (life annuity) is purchased for dependants No tax is payable in respect of the cash lump sum used to purchase a pension for beneficiaries. However, the monthly pension payments will be taxed as an income in the hands of the beneficiaries and will be subject to PAYE deductions if it exceeds the tax threshold. The beneficiary/beneficiaries of a monthly pension may also be subject to SARS's annual income tax assessment.

When the benefit is transferred to a parent or caregiver Assuming that the investment is made in the name of the minor beneficiary for his/her exclusive benefit, investment income will accrue to and be taxed in the minor beneficiary's hands (and not in the hands of the parent or caregiver) in accordance with the individual income tax tables.

Lump-sum benefit payments to a parent or caregiver on behalf of beneficiaries are taxable according to the income tax tables.

When the benefit is transferred to a beneficiary fund The investment income earned by the beneficiary fund will be tax-exempt and all benefit payments made to the beneficiary will be tax-free.

When the benefit is transferred to a trust Assuming that, in terms of the trust deed, the benefit will be used for the exclusive benefit of minor dependants, all income earned will be taxed within the trust. Therefore, benefit payments by the trust to the minor/s will not be subject to income tax again. The trust is taxed as either a special trust (individual tax rates without rebates apply) or normal trust (40% flat tax rate applies).

Payments to a trust are taxed according to the income tax table.

When the benefit is paid out in cash A cash lump sum benefit is taxable according to the income tax table. Income tax table for the payment of death and retirement benefits:

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All retirement fund benefits (approved or unapproved) payable on a member's death is exempt from estate duty.

Approved benefits are payable by the fund in terms of the Pension Funds Act. This benefit may be taxed.

Unapproved benefits are provided through a separate group life cover scheme, i.e., it does not form part of the fund in terms of the Pension Funds Act. This benefit is not taxable.

How is the approved death benefit from a retirement fund paid? The benefit is allocated and paid to the dependants and/or nominees as determined by the Board of Trustees.

The Pension Funds Act prescribes that it is the trustees' duty to find and identify all dependants and nominated beneficiaries. Once they have this information, the trustees must allocate and pay the fund benefit on a basis they deem fair.

The person/s nominated on the beneficiary nomination form will be taken into account during this allocation process.

It is essential that members explain to the trustees the reasons for a nomination and in cases where someone is nominated who is not a dependant, explain why a benefit should be allocated to that person and not the dependants.

If no one was nominated, the benefit will be paid to the estate.

How is the unapproved death benefit from my retirement fund paid? The group life policy prescribes how the benefit must be paid. Many policies stipulate that the benefit must be paid to the person/s nominated on the beneficiary nomination form.

The wording of policies might, however, differ from the situation described above and it may mean the the person/s nominated on the beneficiary nomination form might not be entitled to benefit in terms of the policy, but could be taken into account during this allocation.

If no one was nominated, the benefit will be paid to the estate.

The fund must obtain a tax directive from SARS before any cash lump sum payment can be made. Any tax payable will be deducted from the cash lump sum benefit and paid to SARS by the fund.

Next, the fund may deduct and pay outstanding housing loan sureties, maintenance orders or unpaid divorce orders.

The fund may also deduct losses suffered by the member's employer as a result of any theft, fraud or misconduct on the member's part under certain circumstances.

SARS may recover any arrear taxes from the benefit payable by the fund.

The fund may also deduct any amount the fund has paid (or will pay by arrangement), on the member's behalf, to a medical scheme or an insurance premium payable by the member.

The Pension Funds Act prescribes that the Registrar of Pension Funds can also approve any type of deductions (for example, funeral costs) the fund may make from the benefit.