Did you know that if you’re a member of Old Mutual’s SuperFund, you have group life assurance cover on your life, which takes the form of an additional death benefit?

This is how it works. The funds are drawn from your retirement savings and any life cover you may have and become available if you pass away before you reach retirement age.

Then they’re allocated to your dependants and/or nominated beneficiaries, depending on which type of death benefit you have.

Remember that dependants are typically spouses or partners, children, parents and anyone who may become financially reliant on you in the future.

The two types of death benefits

As an Old Mutual SuperFund member, you can receive one of two possible death benefits. Check which one is relevant to you by reviewing your member benefit statement, statement of benefits, or your profile on Old Mutual SuperFund’s self-service platform.

The two types are:

1. An approved or fund-owned policy

2. An unapproved or employer-owned policy

Approved policy: who gets the funds?

An approved policy refers to the coverage provided by a SARS-approved retirement fund, such as the Old Mutual SuperFund. The proceeds available upon your death will be paid to your dependants, but not necessarily your nominated beneficiaries (unless they are the same).

If your employer has selected the approved death benefit, this risk-benefit will be added to your retirement savings. The amount of the benefit your dependants can expect to receive will be based on a multiple of your full year’s salary, plus the value of your retirement savings at the time of your death.

The Old Mutual SuperFund Management Board will allocate the death benefits in accordance with Section 37C of the Pension Funds Act. The board’s role is to trace and identify anyone dependent on you during your lifetime. These dependants, along with your nominated beneficiaries, are considered when the death benefit is allocated.

The aim is to divide the benefit fairly among the dependants as well as any nominees meeting the criteria of dependency. The board will use your beneficiary nomination form to guide its decisions but is not obligated to rely solely on this information.

In terms of the Pension Funds Act, the board must establish whether there are financial dependants who are not mentioned on the form, and it’s empowered to examine the financial circumstances and needs of both nominees and dependants before releasing funds. This is because the state does not want to be responsible for the upkeep of someone who can fairly claim death-benefit funds.

Unapproved policy: update your beneficiaries

Your employer takes this type of policy out directly with Old Mutual or another insurer.

If you die before retirement age, the proceeds of the policy will be paid out directly to your nominated beneficiaries, without going through your retirement fund. This means that the policy isn’t subject to the rules of the Pension Funds Act, and it won’t be necessary to ascertain whether your beneficiaries are the most suitable recipients of the funds.

However, it’s vitally important that you keep your beneficiary nomination forms updated, especially if your life circumstances change – for example, if you marry, divorce, have a baby, or if a beneficiary passes away before you.

Read the fine print

It’s important to understand the difference between each type of cover as it can have a profound effect on your family members. If there is a chance your dependants may receive the funds you intended for your nominated beneficiaries, you may have to safeguard your dependants’ financial wellbeing in other ways.

A death benefit has obvious advantages – a tax-free payout can make a big difference to your family members – but be sure you know what to expect so you can make alternative financial arrangements if need be. Check your benefit type and make sure you understand the implications of the policy wording.

Want to learn more? Watch our series of explainer videos outlining the various benefits of Old Mutual SuperFund.