Pricey Reader,
Thanks to your query and congratulations in your new job. Firstly let’s clarify what a provident preservation fund is.
A provident preservation fund is a sort of retirement fund that permits people to protect their retirement financial savings on leaving their employer’s provident fund.
The preservation fund must be regulated by the Pension Funds Act and is related to tax advantages – as such, a provident preservation could solely settle for tax-free transfers from a provident fund or one other provident preservation fund.
As of 1 March 2021, a brand new regulation got here into impact within the Pension Funds Act. New contributions made to provident funds from this date will probably be topic to the identical necessities as a pension preservation fund or retirement annuity.
For many who had been already members of provident and provident preservation funds on 1 March 2021, all advantages in these funds as at 28 February 2021, plus any future development on these advantages, is not going to be impacted by the modifications. These advantages will probably be given ‘vested rights’, that means that members will nonetheless be capable to take as much as 100% of those vested advantages in money at retirement. Along with the vested rights on current advantages as at 28 February 2021, if a provident fund member is 55 or older they can even obtain vested rights on the advantages from the brand new contributions made to those funds from 1 March 2021 onwards. Nevertheless, the modifications will influence your new contribution made to your new provident fund.
When transferring employers, you’re permitted to maneuver your earlier provident fund to your new employer. Nevertheless, earlier than making a call, it is very important perceive all of the choices accessible to you.
You’ve gotten stated that you just wish to take a money lump sum earlier than transferring the funds into one other provident fund or a provident preservation fund. You might be permitted to take any quantity, however it will likely be subjected to the withdrawal lump sum profit tax desk, as proven beneath.
| Taxable earnings (R) | Charge of tax (R) |
| R1 – 25 000 | 0% |
| R25 001 – 660 000 | 18% of taxable earnings above R25 000 |
| R660 001 – 990 000 | R114 300 + 27% of taxable earnings above R660 000 |
| R990 001 and above | R203 400 + 36% of taxable earnings above R990 000 |
At retirement, people are entitled to R500 000 tax-free. Which means while you elect to take a sure portion (not higher than one-third of your retirement funds) as a money lump sum, the primary R500 000 will probably be tax-free. Thereafter, the quantity will probably be taxed as per the retirement lump sum profit tax desk. Nevertheless, previous to retirement if any withdrawals have been created from a retirement fund, it will influence the R500 000 tax-free quantity.
We suggest that, if you don’t require a money lump sum out of your provident fund, you switch the complete portion right into a provident preservation fund to protect the capital.
Concerning the danger technique in your preservation fund, we typically suggest that you just contemplate a average danger technique.
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Instance of a average technique |
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| Annualised return | ||||
| Funds | Allocation | 1 12 months | 3 years | 5 years |
| Fairness fund | 25% | 13% | 10% | 10% |
| Balanced fund | 25% | 10.75% | 10% | 8% |
| Secure fund | 25% | 7.50% | 8% | 6% |
| Revenue fund | 25% | 7% | 7% | 8% |
| Weighted common value and return | 100% | 9.56% | 8.75% | 8% |
| Returns are as at 30/11/2022. Previous performances will not be a assured of future returns | ||||
Please be aware a mean return was used for every asset class.
Supply: World & Native
You’ll be able to count on development of between 8% to 10% every year as proven above.
Your monetary advisor will probably be in a position you information you to the suitable choice, nonetheless, you’re greater than welcome to contact us.
