Do you know your deceased relative might have left money for you?
By Simon Wafubwa
It is common knowledge that if one has deferred their pension but dies before claiming it, beneficiaries could inherit some of their entitlement. Availability of benefits payable on or after death is one of the important benefits often associated with pension arrangements.
These benefits are the means by which individuals can make financial provision for dependents and beneficiaries. However, a lot of dependents are not in the know of existing deferred pensions in which they are beneficiaries.
Such scenarios are prevalent in organizations where free movement of labour is common practice. But if not careful, individuals in defined contribution plans who have changed jobs more than 10 times are likely to have the same number of deferred pension plans but unconsolidated.
Take for instance, both you and your employer have been making contributions towards your pension on a regular basis but now you are leaving your employer for other opportunities.
Every time people change employers, pension administrators are obliged to refund all their pension savings plus half of their employer’s contributions. The rest, known as deferred pension, is only accessible to them when they clock 50 years, the age at which early retirement option will be activated.
Say you have been contributing on average Ksh.5,000 every month and your employer doubles the amount to make it Ksh.10,000. If you have been working for that organization for 3 years, you are entitled to Ksh.360,000 before interest and tax. This however gets murky if one has changed employers multiple times.
According to 2016 mortality statistics by World Health Organization (WHO), the probability of a Kenyan adult between 15 and 60 years dying is 256 male and 184 female in a population of 1,000.
The high compounded number of people who die while still in the workforce is a vivid proportionate display of the number of beneficiaries who are in the dark regarding deferred pensions.
This lack of awareness can be attributed to the fact that beneficiaries may be too young to be exposed to such matters. There is also a failure by the principal beneficiary to inform beneficiaries of the existence of such a scheme.
In the event that an owner of a property does not take any action to indicate ownership, interest or awareness during certain duration by law, that property will be regarded as unclaimed.
Retirement Benefits Authority (RBA) has a Memorandum of Understanding (MOU) with the Unclaimed Financial Assets Authority (UFAA) to deal with unclaimed assets in the retirement benefits sector.
Pension scheme trustees are expected to surrender all the abandoned benefits within the timeframes specified under the UFA Act. The Authority then assumes custody and responsibility for the safekeeping of the assets. In fact, it was recently revealed that there are 40,000 ghost beneficiaries, some having died several years ago.
It is therefore important that pension administrators encourage their clients to transfer their deferred pensions to their new employer, or to open an individual pension plan with the purpose of consolidating their numerous deferred payments. Individuals should also ensure that all beneficiaries are aware of an existing deferred pension and that they understand all necessary procedures in the event of death.
You do not lose any financial assets once remitted to UFAA. Indeed, UFAA on behalf of the Government exercise responsibility as holder of assets in the public interest and guarantee you an indefinite right of reunification.
Moreover, with the government announcing its intention to take the defined contributions approach to allow portability of pension benefits and free movement of staff in and out of civil service, the number of Kenyans with deferred pension is expected to increase by at least 50 per cent.
Membership of an occupational pension scheme ceases when you leave that employment. If you have more than a years’ qualifying service, which normally means one year in the scheme as a member for pension purposes, you will be able to leave your benefit in the scheme until you retire. If not, individuals can move or transfer the value of their pension benefits to another pension arrangement.
It would suffice to recommend that pension administrators through relevant authorities liaise with ministry of immigration, which handles death certification, to device ICT driven ways to prompt retirement benefits schemes trustees of the demise of a scheme member. Scheme members should constantly update their addresses with pension administrators.
The writer, Simon Wafubwa, is the CEO Enwealth Financial Services Limited
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