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In earlier newsletters we dwelled on what the purpose of a pension funds is (2015-06, 2015-07), namely to provide for the needs of its members. We suggested that the most important needs of pension funds members are –

  • Death;
  • Disablement; and
  • Retirement.

The name ‘pension fund’ in the first instance suggests that the fund should be about providing for a pension upon retirement. However the other two key needs that should be considered is death and disablement. Besides the fact that members and their beneficiaries are often seriously affected as the result of death or disablement of the member, employers also have a strong moral compulsion to ensure that provision is made for such life changing events mostly by means of the company’s pension fund.

Over the years, pension funds have evolved to provide for these key needs and employers who do not offer a pension fund or whose fund does not provide for these key needs are at a great disadvantage vis-à-vis those that do offer provision for these events in a competitive labour market.

What is a dread disease benefit? Essentially it provides for sickness conditions that cause the employee to be unable to follow his occupation. Conditions covered normally are stroke, heart attack, organ failure or transplant, blindness, paralysis, loss of limbs etcetera.

Usually the dread disease is an accelerated lump sum payment of the lump sum benefit payable in the event of death to assist the employee with the high costs typically associated with such a condition.

We believe that dread disease benefits are a key need of staff at all levels and offer an important competitive advantage to those employers whose pension fund offers these benefits to their employees. Employers whose fund does not offer the dread disease benefit should seriously consider introducing this benefit.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.

 

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