Benefits

THE CONDUCT OF FINANCIAL OF INSTITUTIONS BILL – 2025 Read More »

Need Any Consultations

UNDERSTANDING THE ROLE OF GAP COVER IN SOUTH AFRICA’S PRIVATE MEDICAL LANDSCAPE

Understanding the Role of Gap Cover in South Africa’s Private Medical Landscape

South Africa’s private healthcare system is renowned for its high-quality services but at the same time notorious for the significant year-on-year cost increases. Medical schemes obviously provide much-needed financial support for unplanned medical expenses, but many South Africans are discovering that their medical aid plan alone is often insufficient to cover the full costs of healthcare. This is where gap cover becomes essential.

Gap cover is a short-term insurance product regulated by the Short-term Insurance Act with a statutory annual benefit limit of R210 580.00 that bridges the financial gap between what a medical scheme pays and what healthcare providers charge when you are hospitalised. We will explore three critical reasons why gap cover is becoming indispensable for medical aid members by ensuring your future financial well-being.

1. Shielding Members Against Rising Healthcare Costs

Healthcare inflation in South Africa consistently outpaces general inflation, with annual increases in medical expenses surpassing what many medical aids are willing to cover. The fees charged by specialists in hospitals often exceed the prescribed tariffs set by medical schemes, leaving medical aid scheme members responsible for the shortfall which can be unaffordable to the average person.

For instance, a specialist may charge 300% of the medical scheme rate, but your medical aid plan might only cover up to 100%. Without gap cover, members face out-of-pocket expenses that can quickly become financially crippling. Gap cover ensures that members are protected from these excessive charges, providing peace of mind in an era of continually escalating costs.

2. Supporting Members Downgrading Medical Aid Options

As economic pressures mount, many members are forced to downgrade their medical aid plans to save on monthly premiums. This trend has been exacerbated by a challenging economic environment where medical scheme contribution increases continue to outpace both inflation and concomitantly, salary increase adjustment. Our recent article analysed the recent medical aid increases and furnished some advice to employees. click here to access the article

Downgrading to a more affordable plan typically results in reduced benefits, including lower cover for in-hospital procedures and penalties for non-network hospitals. Gap cover becomes a critical safety net in such situations. By filling the void left by reduced benefits, it enables members to maintain access to high-quality healthcare without incurring unexpected financial burdens.

3. Covering Co-Payments and Deductibles

Even the most comprehensive medical aid plans impose co-payments and deductibles, particularly for specific procedures, specialist fees, or high-cost treatments in hospital. For example, a member undergoing an MRI scan might face a co-payment of several thousand rands, while certain elective surgeries may require significant upfront co-payments and deductibles.

These out-of-pocket expenses can quickly add up, especially for families or individuals who require regular treatment. Gap cover policies often include provisions to cover such co-payments, ensuring that members are not left scrambling to pay these unforeseen costs.

Conclusion

In the evolving landscape of private healthcare in South Africa, gap cover is no longer a luxury – it is a necessity. It protects members from the financial shock of uncovered expenses, mitigates the impact of downgrading medical aid plans, and provides a safety net for co-payments and deductibles. For medical aid members, gap cover represents a vital tool for maintaining access to quality healthcare without the fear of financial hardship.

When selecting gap cover, it is essential to review the terms of the policy carefully, ensuring that it aligns with your medical aid plan and healthcare needs. With the right gap cover in place, members of medical aid plans can safeguard their health and finances in the face of an increasingly challenging healthcare environment.

Reach out to Axiomatic today to ensure your employees are protected and empowered, with solutions that make financial and healthcare sense for all.

Services

UNDERSTANDING THE ROLE OF GAP COVER IN SOUTH AFRICA’S PRIVATE MEDICAL LANDSCAPE Read More »

Need Any Consultations

DEATH BENEFIT INVESTIGATIONS IN TERMS OF SECTION 37C

Death Benefit Investigations in terms of section 37C of the Pension Funds Act

Section 37C of the Pension Funds Act governs the distribution of retirement fund benefits upon a member’s death. These benefits must be paid to dependants and nominees, ensuring that the interests of dependants are prioritised. It also sets out the process that trustees must follow when deciding who qualifies as a dependant or nominee, and how much to allocate to them.

This piece of legislation aims to prevent disputes over pension payouts and to protect vulnerable beneficiaries. In order to discharge this duty fully, S37C gives trustees 12 months in which to conduct a thorough investigation of who the dependants are and the extent of their dependency.

Section 37C(1)(a) reads as follows:

“(a) If the fund within twelve months of the death of the member becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant or, as may be deemed equitable by the fund, to one of such dependants or in proportions to some of or all such dependants.”

Recent High Court ruling on investigation period – case number 4544 / 2023

In South African Retirement Annuity Fund v Pension Funds Adjudicator and S Viljoen, the High Court had to consider when this 12-month period starts – whether it starts on the date of the member’s death, or once the fund becomes aware of the member’s death.

The facts in this case were that a member of the fund died in December 2019. The benefit that became payable from the fund amounted to about R52 000. His spouse, a housewife who had been fully dependent on the member and who was surviving on an old age SASSA grant, was not aware of this benefit. The member left no will and had not signed any beneficiary nomination form. He also left a relatively small estate (with a value of less than R250 000) and initially, no executor was appointed. The spouse only became aware of the benefit about 3 years later when she consulted with a financial planner to assist her in finalising the deceased’s affairs. She submitted a claim to the Fund in March 2022.

The fund, based on section 37C(1)(c) of the Pension Funds Act, paid the benefit to the deceased’s estate.

Section 37C(1)(c) of the Act reads as follows:

“If the fund does not become aware of or cannot trace any dependant of the member within twelve months of the death of the member and if the member has not designated a nominee or if the member has designated a nominee to receive a portion of the benefit in writing to the fund, the benefit or the remaining portion of the benefit after payment to the designated nominee, shall be paid into the estate of the member or, if no inventory in respect of the member has been received by the Master of the Supreme Court …, into the Guardian’s Fund or unclaimed benefit fund.” [our underlining]

The member’s spouse submitted a complaint to the office of the Pension Funds Adjudicator, who found in favour of the spouse and determined that the 12-month period referred to in Section 37C(1) starts when the board of a fund becomes aware of the death of the member.

In her determination she stated the following:

“The general rule expressed in section 37C(1) of the Act that the death benefit does not form part of the estate is subject to three exceptions. The Fund can pay a death benefit into the deceased’s estate only under the following circumstances:

It has not identified any dependant and there is no nominated beneficiary, but the estate’s liabilities exceed its assets; or
The deceased has no dependants and did not designate a nominee in writing; or
The deceased has designated a nominee only to receive a portion of the death benefit, and the remaining balance must be paid to the estate …”

She further referred to the decision of the High Court in Masindi v Chemical Industries National Provident Fund, in which where the court stated the following:

“Whilst section 37C(1) does not expressly state that the 12 month investigation period to trace the dependants of a deceased only commences once the Fund has obtained knowledge of the death of the deceased, the only logical interpretation of this section is that a Fund cannot comply with its obligation if the legislative requirement for its imposition, namely the death of a member, is not made known to the Fund. In Government Employees Pension Fund Provincial Government of Gauteng v Buitendag & Others it was held that the employer in that matter had the obligation to provide the Fund with information pertaining to the dependents of the deceased. By implication, the employer had to inform the Fund of the death of the deceased as well. The 12 month period could only have commenced to run from the time that the respondents became aware that the deceased had died.”

Aggrieved by the decision of the Pension Funds Adjudicator, the fund applied to the High Court to have the determination set aside. The Court agreed with the interpretation in the Masindi case, namely that the 12-month period only starts when the fund becomes aware of the death of a member, and held that:

Any other interpretation would be absurd and defeat the purpose and spirit of section 37C of the Pension Funds Act. It would also fail in ensuring that the fund carries out its mandate to trace the dependants of a deceased member and investigate their dependency on the deceased member.
The fund’s interpretation would shorten the 12-month period, as in almost all cases, the fund will not be aware of a member’s death on the date of death.
The interpretation in Masindi appears to be in line with approved general approach in many other similar provisions, to the effect that the countdown of a period only commences when one is made aware of the root cause, as opposed to the date of the root cause.
The fund’s interpretation was too rigid, and in the process, it forgets the purpose for the existence of the same statutory provision it attempts to interpret. It is for this reason that in Fundsatwork Umbrella Pension Fund v Guarnieri and Others8, the SCA said, where there is doubt about the identity of the dependants who are to receive a distribution, or as to the correct distribution among those dependants, the board is not bound by the twelve months period, but may delay for a time necessary to resolve the issue.

The order of the Pension Funds Adjudicator was confirmed.

Expert Support for Section 37C Death Benefit Investigations Don’t let complex regulations leave your loved ones vulnerable. We provide expert assistance to ensure benefits are distributed fairly and in line with the Pension Funds Act. Reach out to us for a consultation and peace of mind.

Services

DEATH BENEFIT INVESTIGATIONS IN TERMS OF SECTION 37C Read More »

Need Any Consultations

SECTION 14 TRANSFERS UNDER THE TWO-POT SYSTEM

Section 14 transfers under the two-pot system

One of the important matters currently under question is the Section 14 transfer process after 1 September 2024, the implementation date of the two-pot system. Many funds may be in various stages of the transfer process between funds, and it is important to seek clarity.

The technical issues around the section 14 transfer process have been dealt with in three main communications issued in 2024, namely:

Draft Amendments to FSRA Conduct Standard 1 of 2019 (PFA) – Conditions for amalgamations and transfers in terms of section 14 of the Pension Funds Act, 1956 (Act No. 24 of 1956) (known as the Draft Amendments)
FSCA Communication 21 OF 2024 – Draft Forms for Section 14 transfers
FSCA Communication 31 of 2024 – Exemption of funds from certain provisions of the FSRA Conduct Standard No.1 of 2019 (PFA)

A brief summary of the background:

The FSCA published the S14 Conduct Standard on 5 August 2019 – known as “the S14 Conduct Standard”. The S14 Conduct Standard prescribes conditions for amalgamations and transfers, and included, as part of the appendices to the Conduct Standard, the various types of forms that pension funds have to complete when submitting an application under section 14 of the Pension Funds Act (PFA).
The legislative amendments catering for the two-pot system on 1 September 2024 resulted in a misalignment between the current prescribed section 14 application forms and the two-pot regulations, in that the section 14 application forms only allow for a single transfer value, whereas the two-pot regulations require that transfer values be differentiated in two parts in the forms. As such, the section 14 application forms need to be formally changed to reflect the changes to the retirement funds framework brought about by the two-pot.
The problem is two-fold:
- Because the current S14 transfer forms are appendices to a Conduct Standard, changing them requires a lengthy legislative process, and
- The forms need to be changed to cater for the various components (or pots) under the two-pot legislation.

Draft Amendments to FSRA Conduct Standard 1 of 2019 (PFA)

– Conditions for amalgamations and transfers in terms of section 14 of the Pension Funds Act, 1956 (Act No. 24 of 1956) (known as the Draft Amendments)

On 8 May 2024, the FSCA published the draft amendments to FSRA Conduct Standard 1 of 2019 (“the Draft Amendments”) for public consultation. Submissions are due on 19 June 2024.

The Draft Amendments proposed to:

Remove the Section 14 application forms from the Conduct Standard itself, so that the forms could be amended without the lengthy legislative process of amending a conduct standard each time that a change to the forms is required, and
Enable the FSCA to determine the manner of submission, content and format of the section 14 application forms.

No significant concerns were raised in the consultation process, so the Draft Amendments did not undergo substantial changes.

FSCA Communication 21 of 2024 – Draft forms for Section 14 transfers

At the end of June 2024, the FSCA published Communication 21 of 2024. The purpose of which was to:

Invite public consultation on the Draft Forms to be used for transfers under the two-pot system.
Interested stakeholders had until 31 July 2024 to submit comments. The majority of industry stakeholders and bodies have submitted their comments. The final forms have yet to be published.
Clarify the treatment of section 14 transfers with the implementation of the two-pot system.
The communication also provided clarity to retirement funds and administrators on how to treat transfers from one fund to another in terms of section 14 during the transition to the two-pot system.
The communication specifically provided clarity regarding:
- seed capital allocation;
- payment of saving withdrawal benefits; and
- allocation of transfer values across the various components.

FSCA Communication 31 of 2024 – Forms for Section 14 Transfers

At the end of June 2024, the FSCA published Communication 21 of 2024. The purpose of which was to:

Since the Draft Amendments have not yet taken effect, the FSCA has, as an interim measure, granted exemption to all funds from the requirement to use the forms prescribed under FSRA Conduct Standard 1 of 2019. The exemption is granted subject to the requirement that funds must use the revised forms proposed under the Draft Amendments instead.

The exemption will be withdrawn once the Draft Amendments are finalised and the determination notice is published on the FSCA’s website.

Want to understand more about Section 14 transfers in the two-pot system? Subscribe for updates or reach out with your questions—let’s make navigating the system easier together!

Services

SECTION 14 TRANSFERS UNDER THE TWO-POT SYSTEM Read More »

Need Any Consultations

NAVIGATING SOUTH AFRICA’S MEDICAL AID INCREASES FOR 2025

Rising Healthcare Costs: A Guide to South Africa's 2025 Medical Aid Increases

South African medical aid members are preparing for another year of significant contribution increases in 2025, with all the largest schemes announcing above-inflation adjustments. Year-on- year consumer inflation in August 2024 was 4.4% ; however medical inflation is significantly greater than this.

It is that time of the year when members can make option changes effective 1 January 2025, but it is crucial for members to carefully evaluate and understand their medical aid plans to avoid being caught off guard by rising costs and changing benefits.

OVERVIEW OF 2025 MEDICAL AID INCREASES

The announced increases which are subject to Council for Medical Scheme (CMS) approval for 2025, are among the highest in recent years, reflecting rising healthcare costs and pressures (both on the supply side and the demand side) within the sector. Here are the weighted average increases for some leading schemes:

FIVE YEAR TRENDS IN MEDICAL AID INCREASES

The increasing trend is obvious from the above – 5% to 8%, 8% to 10% and now 9.3% to 12.8%. Medical schemes have explained the increase in medical inflation as follows:

increases in the price of healthcare services, typically in line with consumer inflation; and
increases in the demand for healthcare services, because of a gradually ageing membership, increasing prevalence of chronic illnesses, and an increasing proportion of high-cost claimants; and
increases in the supply of healthcare services through new medicines, new medical technologies, advances in medical procedures and increased need for specialised care.

HOW TO APPROACH THE OPTION CHANGE SEASON

Given the significant increases, members must carefully reassess their healthcare needs and budgets. Here are some tips for choosing the best option during the option change season, which will help the discussion with your healthcare broker:

Evaluate Usage Trends: Analyse your claims history to determine whether a comprehensive or basic plan is more appropriate.

Review Scheme-Specific Changes: Certain medical schemes, for example, have introduced enhancements such as improved maternity and wellness benefits, which might make specific plans more appealing.

Compare Plans Across Schemes: While some option increases are on the higher side, they may offer value-added services that could justify the cost for some families and specific high-cost needs while certain more cost effective options may impose co-payments, exclusions and network providers.

Gap Cover and Supplementary Insurance: Consider gap cover to protect against shortfalls for in-hospital benefits, especially when considering downgrading to lower plans which offer limited provider networks and co-payments.

Plan for Financial Sustainability: Align your chosen option with your healthcare needs for the next year.

The 2025 medical aid increases underscore the importance of making informed decisions during the option-change season. With schemes introducing significant hikes and benefit changes, selecting the right plan can be overwhelming. Aligning your healthcare needs with the right coverage is essential to avoid unnecessary costs and surprises down the road.

At Axiomatic, we pride ourselves on providing employer groups and employees with independent, expert guidance on the most appropriate healthcare and employee benefit solutions. Whether you need help comparing medical aid options, understanding benefit structures, or implementing gap cover, we are here to support you.

Navigate South Africa's 2025 medical aid increases with expert advice. Learn how to choose the right option for your budget and needs.

Services

NAVIGATING SOUTH AFRICA’S MEDICAL AID INCREASES FOR 2025 Read More »

Need Any Consultations

Impact of the Pension Funds Amendment Bill on Divorce Matters

Impact of the Pension Funds Amendment Bill on Divorce Matters

Certain of the divorce-related changes in the Pension Funds Amendment Bill (‘PFAB’) have been approved by Parliament. The PFAB was signed by the President on 21 July 2024 and is now law.

On 26 March 2024, Treasury addressed the possible contradictions between the Pension Funds Act and the Divorce Act. Its view was that the Pension Funds Act (PFA) would apply whenever there was a conflict between the Divorce Act and the PFA, which both contain provisions dealing with pension interest and laws that pension funds would ultimately have to apply.

The Current Position

Divorce orders that are enforceable against retirement funds must comply with the definition of ‘pension interest’ in the Divorce Act to allow for a share of a member’s benefit to be paid to a non-member spouse.

The Divorce Act defines ‘pension interest’ as follows:

‘pension interest’ in relation to a party to a divorce action who – (a) is a member of a pension fund (excluding a retirement annuity fund), means the benefits to which that party as such a member would have been entitled in terms of the rules of that fund if his membership of the fund would have been terminated on the date of the divorce on account of his resignation from his office.

This definition allows for a divorce order to be enforceable against the fund where the date of divorce is before the member leaves the fund. The member must still be entitled to a resignation benefit from the fund.

The Position under the PFAB

A new definition of ‘pension interest’ has been included in the PFAB, which provides that:

‘pension interest’, in relation to a court order granted under section 7(8)(a)of the Divorce Act or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion, means, in relation to a party who is a member of a fund, that member’s individual account or minimum individual reserve, as the case may be, determined in terms of the rules of that fund, on the date of the court order.

This definition proposes the pension interest to be the member’s share of the value of the fund, determined in terms of the rules of that fund, on the date of the court order.

This means that, regardless of the membership status, if a member has a benefit in the fund, the divorce order can be enforced. This includes active, unpaid and preserved members, as well as deferred retirees and pensioners.

The different definitions of ‘pension interest’

Concerns were raised about the two definitions of pension interest, one in the Divorce Act and one in the PFAB because retirement funds would now have to decide which definition takes precedence.

As a result of these concerns, a further clause was inserted into the PFAB which says:

In the event of a conflict between the provisions of this Act and the Divorce Act, the provisions of this Act prevail.

Despite the insertion of the above provision, funds are still left with two conflicting definitions of ‘pension interest’. As things currently stand, funds will have to rely on the above provision in giving effect to divorce orders that meet the requirements of the definition of ‘pension interest’ in the PFAB.

How will divorce payments be deducted from the various components?

From 1 September 2024 onwards, members may have the pots below in the fund.

For enforceable divorce orders granted on or after 1 September 2024, this means that each of the member’s pots will proportionally reduce in value. Take, as an example, the following scenario:

Take, as an example, the following scenario:

A valid divorce order is granted for the payment of R 600,000 to the non-member spouse

Member’s current values

Values after payment of divorce claim

How will it impact on Defined Benefit Funds?

Deductions from pensionable service will be made for any reduction in any of the pots to cater for a divorce order. This means that the components are not proportionally reduced by a Rand amount, but the pensionable service in the components will be reduced.

Impact on savings withdrawal benefits

At any time prior to retirement, members will be entitled to access a withdrawal of up to 100% of the amount that has been accumulated in the savings component. This “savings withdrawal benefit” (SWB) will be limited to one withdrawal per tax year. The maximum amount available for a SWB will be the amount that has accumulated in the savings component (contributions plus growth, less any costs) at the date of the withdrawal.

Where a member is getting divorced, this will limit that member’s claim to a SWB.

Once a divorce claim is received by the fund administrator, the administrator should establish whether there is any divorce order, final or pending, logged on the member’s record.

- If there is no divorce order loaded on the member’s record, then the fund’s administrator will continue with the SWB claim;
- If there is a valid final divorce order logged, the administrator will settle that divorce order from the member’s fund credit and then pay the member a SWB based on what is left after settling the divorce order.
- If there is a pending (unfinalised) divorce order, then the administrator must –
  - pend the claim for a SWB;
  - get consent from the non-member spouse for a SWB claim to continue (if the consent form is received and non-member spouse does not give consent then the SWB request must be denied);
  - if the non-member spouse gives consent, process the SWB claim to the member.

The prohibition on paying out a SWB will apply until finalisation of the divorce or until a court order is issued.

Effect on withdrawal on retirement benefits

All resignation, dismissal, retrenchment or retirement benefits must be paid to members where there is no divorce order in place, unless the fund receives an interdict, stopping them from paying out the benefit.

Once the fund receives a valid divorce order, payment to the non-member spouse will be settled by reducing each component (pot) proportionately and any balance left in the fund will be subject to the fund’s existing rules on exit or retirement.

In-fund pensioners

The PFAB says that any deduction to be made in respect of a pensioner for a divorce order must be made from the capital value of the pensioner’s pension after retirement.

The impact and correct interpretation of this provision is unclear and will have to be clarified for funds that have in-fund pensions.

Summary of the new provisions

- The PFAB definition of ‘pension interest’ extends enforceable divorce orders to benefits in the fund after leaving service.
- The deduction of an amount payable in terms of a valid divorce order will reduce each of the vested, retirement and savings components (pots) proportionately.
- If there is a pending divorce, the non-member spouse must consent to the member claiming a SWB.

Services