Fundamental Investments (Pty) Ltd is a financial services company based in Johannesburg, South Africa.The Company offers personalised Employee Benefits and Wealth Management to large, medium, small companies and private Individuals. We employ a focused, tailor-made approach to the changing financial needs of both companies & individuals.

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your options
withdrawal benefit caluclations
important check list



I have resigned from my company what options do I have?

It's not a simple decision because you have many varied options and the choice you make will have long-term consequences.

Your options

Cash withdrawal

This option is totally dependent on the rules of your fund. Some pension / provident fund rules stipulate that you may not exercise this option and must reinvest your pension / provident fund monies. If you have the cash withdrawal option the first R1 800 will be tax-free and the balance will be taxed at your average (tax) rate. Remember if you make a cash withdrawal from your pension / provident fund you will have to invest a larger amount at a later stage to make up for the shortfall. Most people never can make up the shortfall, and find they become reliant on their family in their retirement. Some never will be able to retire and will have to work for the rest of their lives. You also can forfeit a large portion of your employer's contribution if you take a cash withdrawal.

Retirement Annuity

If you are not a disciplined individual a retirement annuity could be a good option as you will not be able withdraw the money until you are 55 or older and then you can only withdraw one third of the capital. The balance must buy you an annuity (Pension) which will pay you a monthly income on retirement.

Invest in your new employees fund

You can invest your pension / provident in your new employees fund. The problem is you will have no control over your assets and the money cannot be accessed until you retire or leave the company.

Preservation Fund

This is a private retirement fund, which belongs to you. The preservation fund is a place where you can leave your money until you reach retirement age. This would generally be your best option.

  • There is no tax payable on the transfer to a preservation fund.
  • The years that you have worked for your employer will be taken into account when you calculate your tax-free lump sum at retirement.
  • You have total discretion where the money is invested and you can make changes at any time.
  • If you are in a provident fund you will retain the option of full cash pay out at retirement.
  • If you are retrenched from your new company and do not find employment you can access part of or the full amount from the preservation fund.
  • Only one cash withdrawal can be made and this is restricted to the rules of your previous pension or provident fund.

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Products

WITHDRAWAL BENEFIT CALCULATIONS

Withdrawal Benefit

Pension Fund

Provident Fund

Retirement Annuity

Cash Lump Sum

Cash Lump Sum

Cash Lump Sum

Subject to rules of the fund.
You may not have this option.

Entire amount

Withdrawal not allowed prior to 55, except upon death or disability

Tax-free portions

Tax-free portions

Tax-free portions

Greater of:

R1 800 + amounts transferred to appropriate funds;

or

Member's contributions
previously disallowed.

Greater of:

R1 800 + amounts transferred to appropriate funds;

or

Member's contributions
previously disallowed.

The amount transferred into another approved Retirement Annuity Fund.

Taxable portion

Taxable portion

Taxable portion

 

Taxed at the higher of the average rates in year of retirement and the preceding year.

Taxed at the higher of the average rates in year of retirement and the preceding year.

Taxed at the higher of the average rates in year of retirement and the preceding year.


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Important check list

1 On withdrawal from your pension / provident fund. Will you get the employer's contribution, plus the growth, or only your share?

2 You could have a conversion option on your group life assurance (GLA). The GLA is the life cover from the company's pension / provident fund that would be paid out to your dependants or beneficiaries on your death. This cover can be continued if you leave the company but the option to continue must be exercised within 30 days of your departure. Normally the only medical test required is an HIV test. You would then pay the premium on your new life policy.

3 Deferred compensation must be ceded to your new employer, as it is a company owned policy. This means that only a company will get a tax deduction on the contributions.

4 A withdrawal form must be completed for the pension / provident fund and this must be signed by your human resources manager.

5 The transfer from the pension / provident fund can take up to three months, this is totally dependent on the rules and the cash flow of the fund.

6 If you are taking the cash option your tax returns must be up to date with the Receiver of Revenue.

7 Don't take any money from your pension / provident fund to pay back any payment to the old pension fund (housing loans etc) as this would be your one and only withdrawal. Rather have the option to make a withdrawal from your preservation fund at a later stage.

8 Find out when the pension / provident funds final investment returns are distributed. Your "actuarial value" (also known as the liability of the fund) and the fund surplus, if any, should be known.

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Authorised Financial Service Provider Licence Number FSP 5683 / Medical Schemes ORG 2320

No 5 Autumn Street, Baobab House, 1st floor, Rivonia
P O Box 1744, Rivonia, 2128
Tel: (011) 803 0613 Fax: 086 524 0783
Email: info@pension.co.za

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