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Provident fund annuitisation

Provident fund annuitisation (also referred to as T-Day) has been implemented on 1 March 2021. These amendments have been implemented to align the rules of provident fund retirement benefits with other retirement funds.

Prior to 1 March 2021

  • At retirement, provident fund members had the option to take their full benefit as a cash lump sum.
  • At retirement, pension fund and retirement annuity fund members had the option to take a maximum of one third of their benefit as a cash lump sum. The remaining two thirds had to be used to buy a pension that provides a monthly income. This remains unchanged.

From 1 March 2021

The amended rules only apply to provident fund members who were younger than 55 on 1 March 2021. These provident fund members will have two investment accounts which will be treated differently at retirement.

  • Investment account 1 (vested benefit)
  • All contributions plus growth accumulated at 28 February 2021 will be invested in this account.
  • At retirement, the full benefit in this account may be taken as a cash lump sum.
  • Investment account 2 (non-vested benefit)
  • From 1 March 2021 all contributions plus growth will be invested in this account.
  • If the benefit at retirement is less than R 247 500, the full benefit in this account may be taken as a cash lump sum.
  • If the benefit at retirement is more than R 247 500, a member may only take a maximum of one third of the fund value in cash. The remaining two thirds must be used to buy a pension that provides a monthly income.

Important notes

  • These rules only apply to retirement benefits. Withdrawal benefits will not be impacted. A member of a provident fund may still access/withdraw their full benefit in cash when withdrawing before retirement.
  • These rules do not apply to provident fund members who were 55 years or older on 1 March 2021. These members may still take their full benefit as a cash lump sum at retirement.
  • However, if a member (55 years or older on 1 March 2021) transfers from an existing provident fund to a new provident fund after 1 March 2021, the amount transferred to the new provident fund will be treated as a vested benefit. Contributions to the new provident fund will be treated as a non-vested benefit.

Questions determining the impact of the legislation on your retirement benefit

  • Are you a member of a provident fund?

# If the answer is yes, were you 55 years or older on 1 March 2021?

** If the answer is yes, the annuitisation rules do not apply unless you transfer your benefit to another provident fund after 1 March 2021.

** If the answer is no (in other words you were younger than 55 years on 1 March 2021), the annuitisation rules will apply.

 

It is important to make an informed decision regarding your provident fund and to keep up to date with current legislation.

Please contact BVSA Employee Benefits (Pty) Ltd for any questions regarding your provident fund.

Tel : 021 914 9604

Email:  employeebenefits@bvsa.co.za

 

Article written by
Ferdi Jacobs
Director: BVSA Employee Benefits

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