Withdrawal Benefits

If you terminate your employment with the University and as a consequence leave the Fund before normal retirement age, you will receive a benefit from the Fund. You have a number of options surrounding the treatment of this benefit. These are:

  1. transfer your funds to a preservation fund;
  2. transfer your funds to a retirement annuity fund;
  3. transfer your funds to your new employer’s fund; or
  4. take the benefit in cash.
NOTE: Research has shown that only 10% of retirement fund members can rely totally on the balance in their retirement fund when they retire. The main reason for this is that they take their Fund balance in cash when they change jobs, and that money is therefore no longer available as a pension when they retire. It is therefore essential for members to be aware of their options to ensure that all options are considered, in the interests of ensuring a higher pension after retirement.

 

Option 1: Transfer to a preservation fund

You may elect to transfer your Share of Fund to a preservation provident fund in your own name.

ADVANTAGES

DISADVANTAGES

No tax is paid on the transfer, thereby preserving the full Share of Fund for retirement. Should you elect to make a withdrawal before retirement, the amount withdrawn will be taxed, and the withdrawal will reduce the eventual value of your pension.
Members have the option to make 1 (one only) future withdrawal from a preservation fund (which can be the full fund value) if money is needed in an emergency. The administration costs associated with preservation funds are typically higher than an employer’s pension or provident fund.
You have control over where your preservation fund value is invested. A personal financial planner can help you to understand your risk profile and help you to select the most appropriate portfolio.

 

Option 2: Transfer to a retirement annuity fund

You may elect to transfer your Fund balance to a retirement annuity in your own name.

ADVANTAGES

DISADVANTAGES

No tax is paid on transfer, thereby preserving the full value for when you retire. You can only access the monies in a retirement annuity when you reach age 55.
You have control over where your Share of Fund is invested.  A personal financial planner can help you to understand your risk profile and help you to select the most appropriate portfolio. Upon accessing the funds (after the age of 55), you can only take up to 1/3 of the benefit in cash. The balance must be used to buy an annuity that will provide you with a monthly income.

 

Option 3: Transfer to your new employer’s fund

You may elect to transfer your Share of Fund to your new employer’s Fund, should this be an option.

ADVANTAGES

DISADVANTAGES

Your Share of Fund is saved for when you retire. You may not have control over where your Share of Fund is invested in your new fund.
No tax is payable, unless you transfer from a pension fund to a provident fund. If you leave your new employer, you will have to transfer your money again.
The administration and asset management charges are based on institutional investor’s charges and are therefore generally lower. You will not have access to this money until you terminate employment with your new employer.

 

Option 4: Take the benefit in cash

You may request to take your Share of Fund in cash. This is not recommended, as you will lose your retirement provision.

ADVANTAGES

DISADVANTAGES

You have the cash in your hands.Note: The earlier you start saving, the better off you will be at retirement age. Small amounts invested years before retirement are going to be worth much more when you are older due to the effect of compound interest and investment returns. Please think about this before taking your benefits in cash. You have not saved your money for when you retire.
Your benefit will be taxed.

 

On withdrawal from the Fund, the benefit will be taxed unless you have chosen Option 1 or Option 2 above, or you have chosen Option 3 above and are transferring from a pension fund to a provident fund. Tax is always payable if you choose Option 4 (ie taking the cash). Tax is calculated according to the following table which is applicable for the year of assessment ending 28 February 2014:

WITHDRAWAL AMOUNT

RATES OF TAX

R0 – R25 000

0%

R25 001 – R660 000

18% of the amount over R25 000

R660 001 – R990 000

R114 300 plus 27% of the amount over R660 000

R990 001 and above

R203 400 plus 36% of the amount over R 990 000

This table applies to the combined withdrawal benefits that become available to you on or after 1 March 2009.

If you are retrenched from the University, and you elect to take the benefit in cash, the benefit  will be taxed. Tax is calculated according to the following table which is applicable for the year of assessment ending 28 February 2014:

TAXABLE AMOUNT

RATE OF TAX

R0 – R500 000

0%

R500 001 – R700 000

18% of the amount over R500 000

R700 001 – R1 050 000

R36 000 plus 27% of the amount over R700 000

R1 050 001 and above

R130 500 plus 36% of the amount over R 1 050 000