Dear reader,
Thank you to your query. We perceive how guidelines round retirement or resigning could also be puzzling typically and we discover ourselves not understanding the choices obtainable to us. Therefore we’ll clarify how preservation funds work.
Preservation funds had been launched in response to a necessity amongst members wanting to save their withdrawal advantages from an occupational fund in one other sort of retirement automobile till they reached retirement age, with the choice of accessing these monies earlier than retirement. This was completed primarily to assist staff who had been laid off, and who then confronted monetary hardship after failing to discover a new job.
Members nonetheless selected to do that for a number of extra causes, such because the clear benefits of tax deferral and preservation of retirement belongings. Previously an employer-employee relationship was required for such a fund. However they’re now thought to be retirement funds, are accredited funds, and subsequently perform equally to pension, provident, and retirement annuity funds.
Certain guidelines apply to preservation funds:
- A member is allowed one full or partial withdrawal earlier than retirement age, after which they’ll solely entry their funds at retirement in accordance to the retirement guidelines.
- Withdrawals earlier than retirement are taxed as per the withdrawal tax desk.
- At retirement age (55) you possibly can solely entry one-third of your funding and two-thirds have to be transferred to an income-generating annuity.
- Withdrawals at retirement shall be taxed as per retirement tax tables.
- At retirement, you might solely take the total money lump sum profit whether it is valued at R247 500 or much less, or if you happen to formally to migrate.
- The funds want to be Regulation 28 compliant. This is a limitation on how a lot publicity you might be allowed in several asset class investments. For instance, no more than 45% may be invested offshore.
No ongoing contributions may be made to a preservation fund; nevertheless tax-free transfers are permitted as follows:
- From a pension fund to a pension preservation fund;
- From a provident fund to a pension preservation or provident preservation fund;
- From a pension preservation fund to a pension fund, pension preservation fund or retirement annuity fund;
- From a provident preservation fund to a provident fund, provident preservation fund, pension fund, pension preservation fund or retirement annuity fund.
The limitations on transfers from pension preservation funds had been put in place to forestall advantages from being cut up into quantities lower than R247 500, which can enable for entry to the complete capital after retirement as opposed to the restricted one-third.
The sums receivable by a pension preservation fund from one other fund is probably not paid or transferred in a manner that divides the funds amongst a number of pension preservation funds.
To reply your query – sure, you possibly can transfer your preservation fund to your present employer’s retirement fund for free of charge.
However, though laws permits the transfer of preservation funds to different retirement funds, fund guidelines differ, and a few funds don’t settle for sure transfers from sure retirement funds.
Therefore, relying on the receiving fund guidelines, your transfer could also be accepted or rejected.
The finest manner to know in case your transfer could also be accepted or not is to request a ‘transfer out’ type from Old Mutual and specify the fund you desire to to transfer to, and they’re going to let you realize if you happen to can proceed or not.
Please observe that when you do transfer the funds, you should have to adhere to the brand new fund guidelines. Municipal and authorities pension funds often have a delegated asset supervisor that determines the funding technique, that means that you’ll not have a selection concerning the underlying funds you desire to to put money into and the funding technique you desire to to use.
The Government Employees Pension Fund publishes a valuation report each three years which studies on whether or not the fund is invested in belongings that also serve the aim of the fund. It additionally publishes annual studies that look into fund efficiency and components that affected the efficiency. Furthermore, particulars on any adjustments to be made to the fund advantages are made obtainable in newsletters which are often printed in 4 editions all year long.
The Municipal Employees Pension Fund doesn’t publish these studies on-line; they’re solely obtainable upon request, relying on whether or not you might be authorised to obtain such info. Clients obtain statements yearly and upon request.