BENEFICIARY FUNDS: Beneficiary Funds Offer Winning Social Transformation Model
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This is especially the case with Alexander Forbes Trust and Beneficiary Fund Services which successfully ensures that over 42 000 largely disadvantaged children for whom it manages death benefits (through beneficiary funds) receive the kind of support, education and career guidance that enables them to transform their lives, despite having lost one or both parents.
Alexander Forbes Trust and Beneficiary Fund Services is responsible for the management of over R2.7 billion in assets received from over 500 retirement funds and employee benefit schemes following the death of members. The Trust and Beneficiary Fund Service ensures that surviving children “benefit from their parent’s investment and reach their full potential, as their parents would have wished” says Bonga Mokoena, Head: Institutional Cluster, Alexander Forbes Financial Services.
Getting this right, however, has brought Mokoena and his team face to face with many of the development and transformation hurdles that so many South Africans seeking to break out of the cycle of poverty and dependence encounter. What differentiates how this private sector initiative manages the funds under its care, however, is “that we focus on achieving improved life outcomes for the individual children concerned by focusing on education and career guidance, as well growing the benefits through active investment” says Mokoena.
How the Beneficiary Funds Work
So, instead of just handing the funds over to whoever is legally recognised as the child’s caregiver, Trust Services releases the funds in a controlled and monitored process to ensure that each child realises their full educational potential. Also, where larger benefits are received, individualised asset allocation means that Alexander Forbes Trust and Beneficiary Fund Services is often able to invest a portion of the younger children’s death benefits in equities, increasing and extending the capacity of the benefit to educate the child, often to tertiary level.
Most of the beneficiaries in these beneficiary funds are not well off. Although the average benefit size is around R100 000, figures disbursed to some children can be in the region of three to four hundred thousand rand. To poor communities this can seem like a large sum - certainly enough for extended families, grandparents or caregivers to buy or build a house for example.
While housing is a pressing need amongst so many South Africans, “little is gained by handing over the lump sum to build a home if the child remains uneducated, unskilled, cannot find a job and is unable to become a financially independent adult” adds Mokoena.
This is why, beyond education, Alexander Forbes Trust and Beneficiary Fund Services collaborates with other interested stakeholders to provide career guidance to their 42 000 beneficiaries, the majority of whom are learners. This career guidance often benefits other learners in the same schools, broadening the footprint of this initiative.
While funds are often disbursed to guardians for items such as educational expenses, food and clothing this is always done on a discretionary basis, relying heavily on a personal knowledge of each child’s particular circumstances and needs.
Beneficiary Funds Aim to Curb Poverty and Illiteracy
In this way Alexander Forbes’ Trust and Beneficiary Fund business is ultimately about people. “We are privileged and honoured to impact the lives of beneficiaries by strategically guiding guardians to help beneficiaries escape South Africa’s poverty, illiteracy and lack of skills traps - unlocking wealth and transforming lives in the process” says Mokoena.
Furthermore, our Trust and Beneficiary Fund business avoids acting as a clearing house, disbursing income or lump sums to beneficiaries without regard to the potential for investment growth or the beneficiaries’ long term needs. As such, Mokoena believes that “there is a great opportunity for all relevant industry players in South Africa to use similar regulation and investment to manage employee death benefits towards the achievement of the country’s social and developmental goals.”
Macro picture aside, “offering employees correctly managed and targeted beneficiary funds provides a powerful employee value proposition, giving employees the security that in the event of their death their children’s benefits will be optimally and prudently managed to secure and better their children’s futures” concludes Mokoena.
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