Death benefits on retirement

SUPPORT: WORKERS' FUNDS FROM VARIOUS PRODUCTS TO GIVE FINANCIAL AID TO LOVED ONES

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Do you know how the death benefits on your retirement products work? Have you ever wondered what happens to your retirement savings when you die?

These funds do not simply disappear as they then provide vital financial support to your loved ones. How they are distributed depends on the type of retirement product you have. Pension and provident funds, retirement annuities, preservation funds and living annuities all work differently when it comes to death benefits, Rita Cool, head of retail best practice at Alexforbes, says.

A living annuity pays you an income from your retirement savings after you retire. You decide how much to draw each year (between 2.5% and 17.5% of your investment value). It is an insurance product, regulated by the Long-Term Insurance Act and the Income Tax Act.

When you die, Cool says, the beneficiaries named in your annuity contract receive the remaining investment. Remember:

► You can update your beneficiaries at any time. If you do not, for example after a divorce, the listed beneficiary will still receive the benefit. The insurer cannot change your choice.