6.6 Retirement Benefit Claims
The main purpose of a pension or provident fund is obviously to make provision for retirement savings. The benefit at retirement will be defined in the rules of a fund and includes provisions for early, normal and late retirement. The rules will state the fund’s normal retirement age; for example, age 65. The benefits will […]
6.4 Death claims
The level of benefits payable to an active member of a retirement fund who dies will be defined in the rules of the fund. There may be benefits payable in addition to the retirement savings. The additional benefit may be in the form of a pension payable to a spouse (or spouses) and minor children. […]
6.3 Withdrawal of Benefits
Subject to the rules of the fund, an employee has the following choices upon withdrawal from a pension or provident fund: Transfer the withdrawal benefit to the new employer’s pension or provident fund – if new funds allow for it. Transfer the withdrawal benefit to a retirement annuity fund. Take the withdrawal benefit in cash. […]
6.2 When are Benefits Payable?
A member of a retirement fund may generally become entitled to its benefits in the following circumstances: Resignation Dismissal Death Retirement Disability Liquidation / partial termination of fund Divorce
6.1 Introduction
When benefit claims arise, the employer is responsible for informing the administrator of the claim. As part of the claim process, the relevant documentation will be submitted by the employer to the administrator. The administrator will access the validity of the claim. The employer’s notification of the claim is accepted in good faith. In some […]
5.8 The principle of aggregation
In terms of the Taxation Laws Amendment Act of 2009, income tax must be calculated on the aggregate of all retirement fund lump-sum benefits taken previously, i.e. on withdrawal and/or retirement, death and retrenchment benefits (including severance benefits) taken previously. The steps to be followed when applying the principle of aggregation when calculating the income […]
5.7 Tax treatment of Benefits
The monthly pension is treated as taxable income, but there is an indirect tax benefit arising from progressive taxation in South Africa. For most members, their pre-retirement income is considerably higher than their post-retirement income. Thus, their tax rate is higher in the years that they contribute and receive a tax break and lower in […]
5.6 Tax Treatment of Pension Fund Contributions
The success and popularity of retirement funds are largely explained by the tax incentives that the government provides for schemes that operate as retirement funds. These tax concessions make sense for the government as they encourage individuals and their employers to provide for their own benefits rather than depend on the government once they are […]
5.5 Inclusive or Exclusively Costed Funds
With an inclusively costed fund, all costs associated with operating the fund are deducted from the contributions paid by the employer. With an exclusively costed fund, the employer will pay an additional amount to cover these costs. There are two variations of inclusively costed schemes: Fully inclusive: The administration costs and the cost of the […]
5.4 Default Regulations
The default regulations prescribe the options that a pension fund or provident will default to, should the member not make an individual choice. The default options must be relatively simple, cost effective and transparent and require the board of trustees to assist members during the accumulation and retirement phases. A. Default investment portfolios (Regulation 37) […]