Retirement Planning

Group benefit schemes

Because many employers arrange a pension or provident fund for their employees, these are often called group benefit schemes. In addition to retirement investments, the employer may offer funeral insurance, medical cover and disability cover. Group benefits work because all of the participants contribute to the benefit scheme. If each person was contributing individually, the costs could be a little higher than if the group is saving together.

These benefits are normally provided by an insurance company and not by the employer. Once a year each employee will receive a benefit statement that provides details on their benefits.

Benefit statements

If you have a retirement investment or are part of a group benefit scheme you will receive a benefit statement once a year. This statement is a very valuable source of information and you should read through it to get a better picture of your financial standing.

Your benefit statement will contain the following information:

• Your name and personal details
• How much you contribute each month
• If your retirement investment or group benefit scheme is linked to your employer it will include how much your employer contributes
• The details of people covered by the benefit scheme for funeral cover and any other insurance

Remember to review your benefit statement every year to make sure your details are correct and that the right beneficiaries are listed.

Beneficiaries and nominees

The Trustees of a retirement fund have a responsibility to make sure your financial dependents benefit from the retirement investment should any funds remain when you die. That is why you should always ensure that your beneficiary details reflect your financial dependents – the people who depend on you for financial support for example your children, spouse, adopted and step-children.

A beneficiary is someone who benefits when a person dies. On a benefit statement there will be a line that shows who the beneficiaries are on the policy. If you don’t select a beneficiary, it creates problems for the Trustees of the retirement fund to decide who to give the money to if the employee dies.

A nominee is a person or organisation that has no formal, direct relationship with you. This might be the church, or a charity, a school or university.

After all the dependents (the beneficiaries) are treated fairly if there are funds left over, the Trustees can then allocate funds to the nominees.

There are 3 kinds of dependents:

• Legal dependents – A person who is legally entitled to be maintained by the deceased due to their relationship to the deceased. An example of a legal dependent is a spouse or a biological child.
• Factual dependents – A person who was in fact dependent on the member at the date of death for maintenance, for example, a person who lived together with the deceased as husband or wife but without being formally married to them.
• Future dependents – A person who would have become legally liable for maintenance if the member has not died, for example, an engaged couple or another person who would have married the deceased.

If your nominated beneficiaries are different to your financial dependents, the Trustees might rule that the money is allocated to your financial dependents.

Remember: It is your responsibility to make sure that the listed beneficiaries on your policy are up to date and that their contact details are updated. As far as possible these should be your financial dependents. Remember that you must update your beneficiaries regularly, especially if your life circumstances change e.g.: you get married, divorced or a new child is born.