Advocate Sankie Morata CFP®, CEO of Sanlam Trust

There is a growing and often underestimated risk factor within beneficiary funds: What happens when a protected minor becomes a financially independent adult?

Beneficiary funds play a critical role in the South African retirement fund ecosystem. They safeguard death benefits for minor dependants, ensuring structured financial support during a child’s most vulnerable years. In many cases, they act as a financial safety net, stepping in where a parent no longer can.

However, while these structures are effective at preservation and protection, the real test of their success lies beyond childhood. We need to ask whether beneficiaries are, in fact, equipped to manage their finances when they reach adulthood and receive their final payout?

“Beneficiary funds provide essential protection during a child’s most vulnerable years, but our responsibility does not end there,” says Advocate Sankie Morata CFP®, CEO of Sanlam Trust. “We must ensure that beneficiaries are equipped with the knowledge, skills and confidence to manage their finances as they mature into adulthood.”

This transition, when beneficiaries receive their final payout or assume control of their funds, represents one of the biggest risk moments in the beneficiary lifecycle. Without adequate preparation, beneficiaries may face challenges managing their lump sum payouts, increasing the risk of rapid depletion of the funds, financial pressures and demands from extended family, and long-term financial instability.

For trustees and principal officers, this is not only a social concern. It is increasingly a governance and fiduciary one.

Allocating death benefits is about more than preserving capital – it’s about securing the long-term wellbeing of dependants. If beneficiaries are not prepared to manage their funds responsibly, the outcomes fall short of that objective.

It’s not only about compliance, it’s about the outcome for each beneficiary.

When evaluating beneficiary fund partners, trustees have traditionally focused on governance structures, cost efficiency, and investment performance. While these remain critical, they are no longer sufficient. Greater emphasis should be placed on how beneficiary funds support individuals throughout their journey, particularly in preparing them for financial independence.

“Financial literacy should be part of how beneficiary funds are designed from the start, not something added on later,” Morata explains. “If we don’t actively prepare young people to manage their money, we risk defeating the very purpose of the benefits meant to support them.”

In practical terms, this requires a more structured and intentional approach to beneficiary engagement. Financial education should not be a once-off intervention introduced shortly before payout. It should start much earlier, and evolve as the child matures. Early-stage support may focus on basic financial awareness, often through guardians or caregivers. As beneficiaries approach adulthood, this should transition into more practical guidance around budgeting, saving, investment, and managing larger sums of money.

This is particularly important in the South African context, where many beneficiaries are raised in environments with limited access to formal financial education. Socio-economic pressures, complex family structures, and competing financial demands can further increase vulnerability when a lump sum is received.

Trustees should also be asking more targeted questions of beneficiary fund administrators:

• How are beneficiaries prepared for final payout?
• What structured financial education programmes are in place?
• How is engagement tracked over time?
• How are real-life challenges, such as financial pressure within extended families addressed?
• How are complex family dynamics managed, including destabilising issues such as drug addiction or alcohol abuse?

These aren’t nice-to-haves – they go to the heart of getting the right outcomes for each beneficiary.

Financial Literacy Month provides an opportunity for the industry to reflect on whether current approaches are adequate. It also highlights the need to move beyond awareness, to measurable impact.

Ultimately, the success of a beneficiary fund should not be measured solely by how well it protects assets, but by how effectively it prepares beneficiaries for what lies beyond the fund lifespan.

For trustees and principal officers, it is no longer only about protecting benefits – it’s about ensuring benefits lead to sustainable financial outcomes. Because even the best-managed benefit falls short if it doesn’t help a young person build a financially secure future.

ENDS

Ed’s note: The EBnet community is invited to attend the 2026 Sanlam Trust Annual Feedback seminar on Thursday, 7 May at 10am. Register here.