You normally retire on the last day of the month in which you turn 65. This is known as your “Normal Retirement Date”. In practice, most members normally retire at the end of the calendar year in which they attain age 65.
You may retire at any time after age 55. On early retirement, your benefit value will be equal to your full Share of Fund at that date. Employees who are permitted to retire early are advised to consider the tax consequences and financial implications of such a move before making any decision.
University HR policy does not permit retirement after the age of 65. In the event of death whilst still a Fund member after age 65, a benefit is paid equal in value to your full Share of Fund at date of death.
The Rules of the UWRF allow for the purchase of an annuity, payment of a cash lump sum, or any combination of these upon retirement from age 55. The payment of a cash lump sum is subject to retirement lump sum tax and the income from an annuity will be subject to income tax.
Should a member wish to opt for a lump sum payment, the Trustees of the UWRF have to ensure that they have fulfilled their legal obligations to the member and specifically also to the spouse of the member. They have to make sure that the member and his/her spouse are aware of the potential loss of income by commuting their benefit, or a portion of their benefit, in the form of a lump sum.
Members are therefore required to complete the Application to the Trustees for a lump sum payment on retirement before a lump sum payment is approved by the Trustees.
If you take a lump sum, the lump sum will be subject to retirement fund lump sum tax. Tax is calculated according to the following table which is applicable for the year of assessment ending 28 February 2014:
|Cash amount||Rates of tax|
|R0 – R 500 000||0%|
|R500 001 – R 700 000||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 R1 050 000|
Any part of your lump sum that has been taxed before, such as a transfer from the AIPF will be tax free. Any lump sum taken from other retirement funds such as previous withdrawal benefits and/or commutation from retirement annuities are included in the calculation of tax payable on an accumulated basis. The structure of the table therefore encourages annuitisation or converting your benefits into an income.
Any part of your benefit utilised to purchase an annuity will be transferred tax-free into that annuity, if your tax affairs are in order.