Retirement Annuities: The Importance of Beneficiary Nominations

Ruvan J Grobler • July 30, 2025

Your estate plan evolves as you get older and regular revision of beneficiary nominations on appropriate investments structures becomes a key planning tool. A holistic financial plan is the roadmap to executing these essential estate planning decisions. Let’s explore the importance of beneficiary nominations on your retirement annuity, pension-, provident or preservation funds.

 

Estate Planning:

  • Availability of funds: If the beneficiary nomination is valid, the death benefit will flow directly from the insurer to the beneficiary. This process can be much quicker than the process of winding up the estate. The death benefit can be paid to beneficiaries before other distributions from the estate is made.
  • Estate related fees: By nominating valid beneficiaries, there is no capital inclusion in the deceased’s estate for estate duty and executor fees. This makes it an effective planning tool in reducing the size of the estate and related fees.

 

Estate duty (SARS): 20% of the dutiable estate after R3.5mil and 25% after R30mil.

Executor’s fees: Maximum of 4.025% (Including VAT) of the deceased estate.

 

Very Important note:

Section 37C of the Pension Funds Act regulates the payment of death benefits. The act aims to identify dependants of the deceased and ensure that death benefit payments are made to them. The trustees appointed by the fund must identify these dependants irrespective of who was nominated by the deceased. The trustees have a duty to conduct a thorough investigation to ensure equitable distribution of death benefits and rely on the financial advisor to provide relevant facts.

 

What if no beneficiaries are nominated?

The above process will still follow but it could then be possible that a determination is made to pay the death benefit to the deceased’s estate. The capital will then form part of the estate for purposes of estate duty and executor’s fees. This may also be an intentional decision in order to provide cashflow in the estate for estate related costs or debt. There are however better options in planning for estate cashflow needs.

 

The above is not financial advice and serves only as factual information. Make sure these nominations align with your long-term financial goals and estate planning by consulting with your financial advisor.

 

Ruvan J Grobler RFP™ (PGDip Financial Planning)

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