Thursday, October 28, 2021

“Death Benefits” guru praises Botswana’s retirement Funds Act

South African Fort Hare University Adjunct Professor Mtende Mhango has said that Botswana’s Retirement Funds Act (RFA) which became effective April 2017 will not only enable Trustees to equitably distribute death benefits proceeds but also end nefarious scams previously suffered from bereavement due to deaths of breadwinners registered as Fund members.

RFA is part of Botswana’s financial services reforms beginning with the enactment of the 2006 Non-Bank Financial Institutions Regulatory Authority Act (NBFIRA). However, the Botswana RFA chapter has the added advantage of consulting and benchmarking with the SA equivalent which has been in existence much longer.

The Regulatory Framework, Death Benefits are now regulated under Sections 38 and 39 of RFA and Regulation 29 of RFA. According to Section 38: “Notwithstanding, the provisions of any written law relating to insolvency, if an estate of any person is entitled to a benefit payable in terms of the rules …, such benefit … shall not be deemed to form part of the assets in the insolvent estate … and may not be attached by the trustees, insolvent estate of creditors.”

Section 39 goes further providing that: “Subject to Section 38, any benefit payable by a fund upon the death of a member shall not form part of the assets in the estate of the member, but shall be paid to dependents and nominees designated in writing to the fund by that member before his death, in such proportions as the Board sees equitable.”

According to Mhango who is also Fort Hare Law Faculty Dean, the thoroughly researched and benchmarked RFA stands hand and shoulders above loopholes in previous death benefit formulae negating the beneficiary distribution chain, specifically next of kin and immediate family.

“Firstly, RFA outlines clear duties to the Board of Trustees on death benefits unlike previously. Secondly, the Trustees ensure that they put in place not only proper systems as compliance mechanisms but also risk management measures. Thirdly, as Trustees they shoulder the onus to make concrete decisions, seeking independent professional consultancy, where applicable, in terms of section 14 (2) (b) of RFA”, said Mhango at a Botswana Pension Society Trustee Breakfast Seminar hosted in partnership with Barclays Bank in Gaborone on December 4.

Mhango a passionate Death Benefits guru also serves as an independent trustee on a number of large pension funds in SA and one large pension fund in Botswana.

For efficacy and smooth functioning, Mhango said the Board of Trustees should ensure members complete and update beneficiary nominations; investigate to establish the deceased member’s bona fide dependants and nominees; exercise discretion and make an equitable distribution of the benefits within 12 months based on the best or most user-friendly method of payment.

Mhango engaged with Thipa Attorneys in Johannesburg, has published and widely distributed papers on death benefits within SADC. One of his articles entitled: “The Emergence of a Comprehensive Regulatory Pension Framework for Pension Death Benefits in Botswana”, published by Oxford University Press in 2013.

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