Controversial as it may seem, the Pension Funds Act prescribes how death benefits payable by registered retirement funds should be distributed but does not provide any guidelines as to the steps to be taken in effecting such a distribution.

The current prescription renders distribution of death benefits a very difficult task and places a heavy responsibility on trustees of employee benefit funds when placing such benefits in trusts.

In dealing with this problem, some trust companies provide a range of options for distribution of death benefits. For example, Absa Trust offers the Absa Employee Benefit Trust, which is designed to ensure that beneficiaries receive optimum benefits from the proceeds of employee benefit schemes.

Cathy McClune says that Absa Trust over the years, identified four basic needs in the market when it comes to employee benefit trusts. Therefore the importance is for product providers to adapt their products and services accordingly to meet their clients’ needs.

The majority of pension fund monies transferred to employee benefit trusts are small capital amounts.

The challenge from a product provider’s point of view is the aspect around affordability given the general costs of trusts in the market. Absa Trust has developed a product addressing the affordability aspect.

There is also a need in the market for clients with especially large capital amounts needing a more flexible product, which offers income as well as access to the capital.

A further need in the market is a product offering maximum capital growth to the beneficiaries. Trust costs are also considerably cheaper with this product offering because the need for administrative support is limited.

The fourth need for employee benefit trusts is for beneficiaries with large capital amounts requiring income and capital protection.

McClune says that with market segmentation, the challenge is not only to address trust costs but also to ensure that the beneficiaries receive optimal benefit from their employee benefit funds by ensuring that the right investment instruments are used.

Furthermore, it is also important to offer your support services accordingly to the four basic client segments. Absa Trust has an innovative communication brochure with illustrations which is sent to the guardian of the beneficiaries to ensure that they understand the process of the trust.

Trustees therefore have to ensure that the right product with employee benefit trusts is utilised for their deceased members’ beneficiaries to ensure optimal utilisation of employee benefits.

Cathy McClune can be contacted on 0824577331 or at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .