Preservation fund

Nelson Mandela Bridge, Johannesburg. Image: <a href'http://www.flickr.com/photos/76236133@N00/1325775532/'>Von_</a> Nelson Mandela Bridge, Johannesburg. Image: Von_

Preservation Funds - Provident or Pension

Are you changing jobs?

If you are about to move from one employer to another you will probably now be required to make a decision on what to do with your current value in your employer fund. At this point it is important that you understand clearly the implications of the various options available to you. Investing for retirement now is a vital decision that can greatly impact on your lifestyle and that of your family in future years. Growing your capital and preserving the tax status of this investment can make a substantial difference to your retirement benefits.

Who should consider using a preservation fund?

  • If you have an existing benefit in your current employer’s provident or pension fund and are moving from your employment as a result of retrenchment, resignation or dismissal, or
  • If your membership of your current fund needs to terminate, e.g. the fund is closing, or
  • If you are a non-member spouse and wish to transfer the portion allocated to you on divorce to a preservation fund, subject to legislation.

No ongoing contributions are allowed, by legislation, to be paid to a preservation fund unless they relate to interest or actuarial surplus payments from the transferring fund.

What are the advantages of investing through a preservation fund?

  • You can transfer to a preservation fund tax free by moving from a pension fund to a pension preservation fund and from a provident fund to a provident preservation fund.
  • You preserve the tax status and continue to grow your capital.
  • Once you are a member, you are able to make one full or partial withdrawal before retirement age of 55 years. Once you have made a partial withdrawal, the remaining balance cannot be accessed until retirement age. This option is subject to any requirements of the transferring fund and/or legislation.
  • You do not need to move your investment if you change jobs in the future.
  • You can add to your existing preservation fund when you leave employers in the future.
  • You do not have to wait to resign from an employer to make a withdrawal.

How can money in a preservation fund be accessed?

Funds can either be withdrawn from your preservation before or on retirement.

Full or partial withdrawal prior to retirement
Preservation fund members may make one full or partial withdrawal before retirement age of 55. Once you have made a partial withdrawal, the remaining balance cannot be accessed until retirement age. This option is subject to any requirements of the transferring fund and/or legislation.

Withdrawal on retirement (after age 55)
If you are a member of a pension preservation fund, maximum of one-third of your value can be taken as cash. The remainder of the benefit must be used to purchase a pension-providing (annuity) product such as a living annuity. If the value is equal to or below R75 000, the entire value can be taken as cash.

If you are a member of a provident preservation fund you may draw either a portion or your entire value as cash. If only a portion is taken in cash, the remainder of the benefit may be used to purchase a pension-providing (annuity) product such as a living annuity.

Remember that cash withdrawals from preservation funds are taxable in accordance with the prevailing Acts that govern taxation and retirement funds.

What happens to my investment if I die?

When a member of a preservation fund dies, the dependants or nominees may choose to use the benefit to purchase an annuity or receive the benefit as a lump sum payment. If no dependants are located and no beneficiaries nominated, the death benefit will be paid to your deceased estate as a lump sum.

Why should I consider Glassock's preservation funds?

If you have a benefit due to you of R250 000 or more that you wish to transfer to a preservation fund, you should consider the Glassock preservation funds – the Umbrella Plus Provident Preservation Fund and the Glassock Pension Preservation Fund – for the following reasons:

  • Simplicity of investment choice across a range of asset managers providing top tier, cost-effective performance. The clear and understandable cost structure allows you to measure your investment performance easily on an after cost basis.
  • Freedom to switch between portfolios offered on our platform at any time at no additional charge (unless you switch more than twice in a calendar year) as your investment objectives and circumstances change. You may, at any time, choose to transfer from a Glassock preservation fund to another preservation fund, employer fund or retirement annuity (RA) without incurring exit costs.
  • Transparency of reporting on investment performance and total costs allows you to keep your retirement savings strategy on track. All information can be accessed online.
  • Cost effective fee structure is fully disclosed on entry to the fund/s. No initial or upfront fees, typically paid on entry to preservation products, are payable. Long-established relationships with our asset managers allow for very low asset management fees. We seek to maintain the total expense ratio in the fund to under 1,2% of asset value per annum.
  • Consistent long term returns are required from the asset managers selected for our platform. We actively seek out managers with track records that demonstrate their ability to actively outperform the indices on a consistent basis. Low cost passive investment options are also available through the Satrix tracker products and Deutsche Bank x-trackers.

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