Your children's future: who will be there if you're not?

Issued by Fedgroup Financial Services
Johannesburg, Aug 18, 2015

Providing for the education of our children is key to them reaching their full potential. But the cost of educating a child in South Africa comes at a hefty price. Parents are advised to make provision through savings, but often neglected from this provision is the protection against the unforeseen. Should a parent no longer be there to take care of their children's education, who will?

Lump sum death benefits are typically used to extinguish debt and provide for the immediate living expenses of surviving dependents. However, the education needs of children, which are long-term needs, are often neglected or not considered at all. Employers are in a position to meet this need by providing group education benefits for the education of deceased employees' children.

Having developed over the last couple of years, there are now various insurers who offer group education benefits. These insurers differentiate themselves and the group benefit market according to benefit rules, taxation and benefit type. Notably, the most suitable of these insurers offer the following benefits:

* A lump sum that is directly related to a parent's salary;* A lump sum that takes cognisance of age;* A benefit that provides for more than one child; and* A benefit that provides for more than just school fees, taking into account other related costs such as transport, aftercare or extra lessons.

In addition to these benefits, proper administration and active trustee involvement are also critical to the aim of group education benefits. A trust structure is ideal in terms of these two aspects:

* Administrators of benefits should be competent to pay for education expenses on an ongoing basis, as and when they arise. Insurers are not always able to administer benefits of this nature effectively, especially where there are complex benefit rules. Trust administrators deal with benefits of this nature on an ongoing basis and are thus best suited.* Within a trust, trustees work together with the surviving parent or guardian to allocate funds. Exercising their fiduciary duty, trustees ensure more than just monthly school fees are paid, but the child's educational well-being and progress is monitored.

Regardless of the technicalities, it is encouraging to see insurers have recognised the importance of education and its role in transforming South Africa into the country that we need it to be.

To ensure a child's education is provided for, parents should encourage their employers to make these benefits available to them on a group basis. Likewise, employers should recognise the value in group education trust benefits as a powerful and compelling employee benefit that honours the legacy of their employees in a manner well befitting to their legacy.