J Arthur Brown losing his ConCourt appeal against his 15 year prison sentence for fraud and theft of pension monies reminds us why Beneficiary Funds serve as a safer alternative to umbrella trust funds.
Beneficiary Funds were introduced in South Africa in 2008 after Brown’s Fidentia Group embezzled millions of Rands belonging to beneficiaries of the Living Hands Umbrella Trust.
The Living Hands Trust was responsible for paying money from the mineworkers' provident fund to the widows and orphans of workers killed in mine accidents. After Fidentia’s misappropriation of the Trust’s funds, the Financial Service Board changed the way death benefits from pension funds were handled. Until the law changed, when a member of a pension fund died, the Fund could pay out the death benefits to a trust regulated by the Master of the High Court.
Now, with few exceptions, trustees have to pay to a Beneficiary Fund instead. These Beneficiary Funds are comprehensively regulated so that the beneficiary, usually a minor child, can have greater protection.
“Trustees of pension, provident, preservation or retirement annuity funds need to look at what the most appropriate option is when death benefits have to be paid a to a minor child or someone who’s unable to manage monies. They need to consider which Beneficiary Fund can tackle this task in the best interests of the beneficiary. They have a responsibility to look at the value proposition offered by the Beneficiary Fund, its size and the experience of its administrative personnel or they would be failing in their fiduciary duties,” says Clive Hill, a Legal Adviser at Sanlam Trust.
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