DEFINED CONTRIBUTION

RESIGNATION OPTIONS

Options available if you resign

Disclaimers

1. The following represents a summary of the Rules of the Fund. In the event of a conflict between this summary and the Fund Rules, the Fund Rules will apply. Click here to view our full disclaimer.

2: The information contained on this website  does not constitute advice either by the Board of Trustees or its advisors.  If you need more information on how you invest your resignation benefit you are strongly advised to seek professional advice.

This section describes the options you have when you resign or are dismissed or retrenched by the Fund.

The following options are available to you:

When you leave the Fund, you automatically become a “paid-up” member of the Fund – your full Member Share will remain in the Fund, earning the same net investment returns as you have previously received.


However, you can make the following choices, either immediately or at a later stage (all these options are discussed in detail further in the document):

  1. You can leave the full benefit in the Fund (and remain a paid-up  member); OR
  2.         You can transfer the full benefit to another retirement fund (an approved Preservation Pension Fund, Retirement Annuity Fund, or your new         employer’s pension fund), immediately or at a later stage; OR
  3.         You can take the full benefit in cash as a lump sum (though this will be subject to tax, and will reduce your ability to enjoy a financially         comfortable retirement, and is generally not a good idea); OR
  4.         You can choose a combination of part cash and part transfer to another Fund


Note: If you have a housing loan with the Fund, the loan balance will be deducted in full on becoming a paid-up member.

                You are not entitled to any insured benefits i.e. life assurance cover, funeral cover, disability cover, etc.

                You may not make any contribution as a paid-up member.


While you are a paid-up member of the Fund, a monthly charge will be deducted from your Fund Credit to help cover the costs of operating the Fund.  Currently, this charge is R27, 70 per month, plus VAT.


The issues to consider in deciding what to do with your resignation benefit are quite complex. The next sections deals with these options in more detail.


You may elect to receive your resignation, dismissal or retrenchment benefit entirely in cash.

  • If you make this election the full benefit is taxable - see "Taxation of Benefits" for the tax treatment of this amount.
  • You have complete flexibility in deciding how you wish to use your after tax resignation benefit.
  • However, you must remember if you don't set this money aside for your retirement, you will have less money available when you finally retire. The reality is that many people retire with inadequate money because they have not left their resignation benefit for retirement.

BECOMING A PAID-UP MEMBER 

This option is the default option on withdrawal. This means that you automatically become a paid-up member of the Fund when you resign, are dismissed or get retrenched. By becoming a paid-up member, your savings (member share) remains in the Fund until you decide to take your benefit. The timing for taking your benefit can be at any stage after becoming a paid-up member. 


You are entitled to become a paid-up member in respect of the whole of your benefit. You may not become a paid-up member in respect of part of your benefit.  You may of course withdraw the whole of your member share immediately or at any time after becoming a paid-up member.


As a paid-up member, you will not be allowed to make any contributions to the Fund, but your investments will continue to grow with investment return. Your investments will continue to benefit from compound interest.


You may receive a retirement benefit at any time from age 55 onwards, if you elect to take a retirement benefit from the Fund. In this case, you will be entitled to any of the retirement options available from the fund (explained in a separate section titled “Retirement Benefit Options”). 


On electing to become a paid-up member, you will receive a paid-up certificate from the Fund which will contain all relevant details of your paid-up status. 


Your account will be debited with reasonable administration and other fund expenses as determined by the Trustees. These expenses will not be more than the expenses of active members of the Fund. These are disclosed in the section detailing costs.  

Should you choose to transfer your pension to a retirement annuity;

  • You will not pay any tax at the time you transfer the money and you will be preserving your benefit for your retirement.
  • Importantly you can only receive a benefit from a Retirement Annuity Fund on your retirement on or after age 55 (or on your earlier death or ill-health retirement).
  • You should also be aware that the cost structure of a retirement annuity will be higher than becoming a deferred pensioner of the Fund.
  • A Retirement Annuity Fund is not a paragraph (a) Fund and therefore you will lose the favoured tax status of your benefit at retirement (see Taxation of Benefits).

The tax treatment here is complex and depends on whether the new Employer has a paragraph (a) Fund and whether this Fund is a Pension or a Provident Fund (see Taxation of benefits).

Tax will almost certainly be the main determinant of whether it is sensible to transfer your resignation/dismissal benefit to the new Employer's Fund. Assuming that you are considering transferring your benefit in this way, this option makes most sense when the new Employer's Fund is a paragraph (a) Pension Fund.

The possible advantages of this option (assuming favourable tax treatment) are:

  • You preserve your benefits for your ultimate retirement.
  • It is a cheap option (e.g. no commissions are payable).

The taxation Laws Amendment Act introduces tax free transfers between all approved funds with effect from 1 March 2016.

You may transfer all or part of your benefit to a Preservation Fund. Such transfer will be tax free.

The advantage of a Preservation Fund is that you may make one cash withdrawal from the Preservation Fund.                                               

PENSION FUND RULE BOOK

The registered rules of the Fund contain everything you need to know about your Fund, its Governance, Management, Investments and Benefits. The Fund is bound by the Rules of the Fund. In the event of a dispute between any information provided and the Rules of the Fund, the rules will apply.

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