Our ‘Rainbow Nation’ represents a rich tapestry of cultural diversity, with a wide variety of different practices when it comes to, for example, marriage, family and dependants. These practices have a significant impact on the way in which retirement funds serve their members when it comes both to saving and investing for retirement, but especially when it comes to distributing death and other benefits. This article, and the articles to follow in this publication, highlight how cultural practices have a significant influence on retirement funds and their distribution of member benefits.
‘Rainbow Nation’ ya habo rona ke letshwao le matla la sebopeho sa merabe e fapafapaneng ya setjhaba sa rona, moo re nang le meetlo e fapafapaneng ha re tla ho, ho etsa mohlala, lenyalo, lelapa le baphedisuwa. Ditlwaelo tsena di na le tshwaelo e kgolo hodima tsela eo matlole a ho beha meja fatshe a sebeletsang beng ba wona ha re tla ho bobedi dipolokelo le ho jala matsete bakeng sa ho beha meja fatshe, empa haholoholo ha re tla ho ho aba dihlapiso tsa ho shwa le tse ding. Sengolwa sena le dingolwa tse tla latela phatlalatsong ena, di hlakisa ka moo ditlwaelo tsa botjhaba di nang le tshusumetso e kgolo hodima matlole a ho beha meja fatshe le ho abeng ha bona ha dihlapiso ho ditho.
Retirement funds, given the broad-based composition of their membership base, are a true reflection of our beloved Rainbow Nation from a cultural diversity perspective. Retirement fund members represent South African society across various ethnicities and cultures, each with their own unique customs and social practices – especially when it comes to marriage, children, extended families and dependants. These differences are most clearly evident when it comes to the distribution of benefits by a retirement fund when necessitated by life events, such as marriage, divorce and death.
The COVID-19 pandemic has focused the minds of government, business and civil society for all stakeholders to play a more deliberate role in cultivating a more inclusive and equitable economy for all South Africans. This includes South Africa’s retirement fund industry, given its influential role from both a capital allocation perspective and with respect to how it assists millions of employees to save and invest for retirement, but also with the provision of risk benefits, to assist employees when these benefits are needed.
For the cultivation of an inclusive retirement fund industry to take place, however, it requires the industry – and especially boards of trustees – to have an extensive understanding of different aspects of cultural practices; specifically, those that intersect with the retirement fund industry when it comes to retirement benefits. The traditional model of retirement is that a person saving for retirement is saving for themselves and their immediate dependants, such as their spouse and children. In addition, once a person reaches retirement, it’s assumed their children will be out of the house and they will have eliminated any significant debt for assets, such as houses and cars. However, in reality this is not the case for most South Africans. A person saving for retirement often has to do so while providing for their family, aging parents or grown children, who have not left the home, and an extended family who may require regular financial support. How can we expect a person to save for retirement when they have such a wide lens of responsibility?
A well-known example of this increased lens of responsibility for a vast majority of South Africans is what is referred to as ‘black tax’. Black tax refers to the responsibility placed on black employees to contribute financially, often on a monthly basis, towards people within their immediate and/or extended family who are in need of regular financial support. The black employee thus assumes financial responsibility for an extended family of dependants when compared to employees from other demographic groups in the country. Black tax demonstrates that the definition of family, and an individual’s financial responsibility towards dependants, may differ greatly between any single retirement fund’s membership base.
Approaches to marriage also differ across South Africa’s various cultures and the legal recognition of marriage by means of civil marriages, customary marriages and civil unions is made possible by South African law. However, many ‘married’ couples requiring the distribution of a retirement benefit at the time of divorce or death find out too late that they are not in fact legally married as, for example, in the case of a customary marriage, where all requirements may not have been fulfilled in order for the marriage to be legally recognised in the Recognition of Customary Marriages Act.
The Pension Funds Act defines as dependant, the spouse of the member. S37C of the Pension Funds Act therefore requires the board of a retirement fund to discover dependants of the deceased fund member, in order to effect a fair and equitable allocation of the member’s death benefit.
Old Mutual | Department of Home Affairs,
SA Government | Alexander Forbes
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