WHAT THE RE­FORM MEANS FOR PROV­I­DENT FUND MEM­BERS

Finweek English Edition - - IN DEPTH RETIREMENT -

As of March 2015, prov­i­dent funds are treated more like pen­sion funds. But this does not mean the end of prov­i­dent funds.

Prior to the re­form, pen­sion fund mem­bers could re­ceive a third of their to­tal ben­e­fits in cash, while two-thirds were paid out as pen­sion for the rest of the mem­ber’s life. The prov­i­dent fund mem­ber, on the other hand, could get one with­drawal be­fore retirement and their full ben­e­fit paid in a cash lump sum.

With the new re­form, a mem­ber aged 55 or older as of March 2015 – when the re­form was im­ple­mented – will not ex­pe­ri­ence any changes in ac­cess to their funds. Such prov­i­dent fund mem­bers will still be en­ti­tled to the ben­e­fits of the prov­i­dent fund struc­ture as we cur­rently know it, says Butchart.

If the retirement fund mem­ber had not reached the age of 55 on the im­ple­men­ta­tion date, then the vested value in their cur­rent funds will be no­tarised. “That por­tion of your funds, as well as the growth on that por­tion of the funds, will be dealt with in the ap­pli­ca­ble tax dis­pen­sa­tion as was pre­vi­ously the case. Ad­di­tional pre­mi­ums and growth af­ter the ef­fec­tive date will be dealt with as per the new tax dis­pen­sa­tion and will need to be an­nui­tised at retirement in the same man­ner as a pen­sion fund,” says Butchart.

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