What you need to know!
Over the last few years many changes that will affect Retirement Funds have been proposed, some have been implemented and some delayed.
One of the changes that was proposed and then delayed is the equalization of Pension and Provident Funds. This means that both these funds will be treated the same from a tax point of view. What was initially supposed to be effective from 1 March 2015 will now be implemented from 1 March 2021, also known as “T-Day”.
How does this affect you?
- The T-Day changes will only apply to Provident and Provident Preservation Funds.
- Nothing will change in terms of your ability to access your funds if you withdraw before retirement.
- From 1 March the same rules will apply to Provident Funds as apply to Pension Funds.
- Your member share will consist of two portions
- Vested Member Share
- Non-Vested Member Share
- If you are 55 years or older on 1 March 2021, you will not be affected by any of these new rules – as long as you stay in the same Provident or Provident Preservation Fund.
How will T-Day affect your retirement benefit from 1 March 2021?
Decide which of the following situations applies to you:
You are younger than 55 and you are saving for retirement in a Provident or Provident Preservation Fund.
- You will have a Vested member share (vested rights).
- All your savings as at 28 February 2021(plus interest thereon) will be in this portion
- You may take this portion in cash when you retire.
- You will also have a Non-Vested members share(non vested rights).
- All your savings from 1 March (plus interest thereon) will be in this portion
- If this portion is R 247 500 or less, you will be able to take this in cash when you retire.
You are 55 years or older on 1 March 2021 and you are saving in a Provident or Provident Preservation Fund and you stay in the same fund until you retire.
You will have a Vested member share (vested rights).
All your savings up to 28 February 2021 and all your savings from 1 March 2021 (plus interest thereon) will be in the Vested portion
You will be able to take all your savings in the Vested portion (plus interest thereon) when you retire.
You are 55 years or older on 1 March 2021 and you are saving in a Provident Fund or Provident Preservation Fund and you transfer to a new fund after 1 March 2021.
- You will have a Vested members share (Vested rights).
- All your savings (plus interest thereon) as at date of transfer will be in the Vested portion
- You may take this portion in cash when you retire.
- You will also have a non-Vested members share (non vested rights)
- All your new savings plus interest in the new fund will be in this fund.
- If this portion is less than R247500 when you retire you can take it as cash.
- If this portion is greater than R247500 then you can take one third in cash and you must use the other two thirds to buy a pension when you retire.