UMBRELLA RETIREMENT FUND WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? EFFECTIVE 1 JUNE 2017 VERSION 1.0

Transcription

1 UMBRELLA RETIREMENT FUND WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? EFFECTIVE 1 JUNE 2017 VERSION 1.0

2 WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? As an Allan Gray Umbrella Retirement Fund member, when you leave your employer your retirement savings will remain invested with Allan Gray and you can access your money at any point in the future. YOUR RETIREMENT SAVINGS WILL AUTOMATICALLY REMAIN INVESTED You do not need to do anything for your investment to continue. The money you have saved so far will remain invested in your current portfolio allocation, which you can change if you need to at any time. Important points to consider: Long-term growth: The longer you leave your money invested, the more time it will have to grow and the higher your income will be in retirement. Safeguard your retirement: Try to keep your retirement savings for its intended purpose - your retirement, when your savings will need to fund your lifestyle. Avoid losing your tax benefits: If you withdraw from your investment prior to reaching retirement age, you will decrease your overall tax benefits, and tax may be deducted from your withdrawal. UPDATE YOUR DETAILS TO STAY INFORMED Your contact details may change when you leave your employer. Please log in to your Allan Gray Online account at to check that we have the correct contact details for you and update them if necessary. YOU CAN ACCESS YOUR MONEY The options available to you depend on your reason for leaving. Please refer to the relevant section of this document for more information. RESIGNATION (Refer to page 2) RETIREMENT (Refer to page 6) DISMISSAL / RETRENCHMENT (Refer to page 4) DISABILITY (Refer to page 8) 1 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER?

3 RESIGNATION MOVING TO ANOTHER RETIREMENT PRODUCT If you feel that a different retirement product is better suited to your needs, you may transfer your savings to another product. Allan Gray offers two retirement products: The Allan Gray Retirement Annuity Fund, or The Allan Gray Pension/Provident Preservation Fund You may also move to a retirement product offered by another financial services provider. What are the benefits of choosing this option? You will not have to pay tax if you transfer to a retirement annuity fund, a preservation fund, and/or your new employer s retirement fund. You are not restricted to the unit trust/s your employer has selected for you. You can invest in any unit trust offered on the Allan Gray investment platform that complies with the prescribed retirement fund investment limits. HOW TO MOVE TO ANOTHER RETIREMENT PRODUCT 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Complete and sign the relevant transfer form. Transfer to the Allan Gray Retirement Annuity by completing and signing the Retirement Annuity Fund Application instruction. Transfer to the Allan Gray Pension/Provident Preservation Fund by completing and signing the Pension and/or Provident Preservation Fund Application instruction. WITHDRAWING When you leave your employer, you have the option of making a once-off withdrawal of some or all of your retirement savings. If you withdraw a portion, the balance will need to be transferred to another retirement product, for example the Allan Gray Retirement Annuity Fund or your new employer's retirement fund. Reasons this option may not be suitable for you: Withdrawing from a retirement fund reduces the tax benefits you enjoy in the fund. Pre-retirement withdrawals are taxed significantly more than cash lump sums at retirement. Using your retirement savings before you retire may affect your lifestyle in retirement. All previous withdrawals (including retirement cash lump sums and severance benefits) are taken into account when calculating how much tax you will pay. HOW MUCH YOU WITHDRAW HOW MUCH TAX YOU WILL PAY R0 - R % R R % of the taxable amount above R R R R % of the taxable amount above R R and above R % of the taxable amount above R Your withdrawal amount is significantly reduced by tax. Example 1: If you withdraw R , you will pay R to SARS (18% of R ). Example 2: If you withdraw R , you will pay R to SARS (R R37 800). ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? 2

4 A withdrawal instruction cannot be cancelled Many retirement fund members change their minds about making a withdrawal once they see how much they will be taxed. It is important to realise that you cannot cancel your instruction once you have submitted it. We apply for a tax directive when we receive a withdrawal instruction. In terms of legislation, once a tax directive has been applied for the instruction cannot be cancelled. The taxable amount stipulated on the directive is final and will be paid to SARS from your account. The balance of your requested withdrawal amount will be paid to you. HOW TO MAKE A WITHDRAWAL 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Any remaining balance must be transferred to another retirement fund. Transfer to the Allan Gray Retirement Annuity by completing and signing the Retirement Annuity Fund Application instruction. Transfer to the Allan Gray Pension/Provident Preservation Fund by completing and signing the Pension and/or Provident Preservation Fund Application instruction. 3 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER?

5 DISMISSAL / RETRENCHMENT MOVING TO ANOTHER RETIREMENT PRODUCT If you feel that a different retirement product is better suited to your needs, you may transfer your savings to another product. Allan Gray offers two retirement products: The Allan Gray Retirement Annuity Fund, or The Allan Gray Pension/Provident Preservation Fund. You may also move to a retirement product offered by another financial services provider. What are the benefits of choosing this option? You will not have to pay tax if you transfer to a retirement annuity fund, a preservation fund, and/or your new employer s retirement fund. You are not restricted to the unit trust/s your employer has selected for you. You can invest in any unit trust offered on the Allan Gray investment platform that complies with the prescribed retirement fund investment limits. HOW TO MOVE TO ANOTHER RETIREMENT PRODUCT 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Complete and sign the relevant transfer form. Transfer to the Allan Gray Retirement Annuity by completing and signing the Retirement Annuity Fund Application instruction. Transfer to the Allan Gray Pension/Provident Preservation Fund by completing and signing the Pension and/or Provident Preservation Fund Application instruction. WITHDRAWING When you leave your employer, you have the option of making a once-off withdrawal of some or all of your retirement savings. If you withdraw a portion, the balance will need to be transferred to another retirement product, for example the Allan Gray Retirement Annuity Fund or your new employer's retirement fund. Reasons this option may not be suitable for you: Withdrawing from a retirement fund reduces the tax benefits you enjoy in the fund. Pre-retirement withdrawals are taxed significantly more than cash lump sums at retirement. Using your retirement savings before you retire may affect your lifestyle in retirement. Qualifying retrenchments A qualifying retrenchment means that your instruction will be taxed according to the retirement tax tables. Your retrenchment may be considered a qualifying retrenchment if: Your employer stopped or intends to stop doing what you were employed to do. You became redundant as a result of a general reduction in personnel. ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? 4

6 All previous withdrawals (including retirement cash lump sums and severance benefits) are taken into account when calculating how much tax you will pay. CASH LUMP SUM AMOUNT HOW MUCH TAX YOU WILL PAY R0 - R % R R % of the taxable amount above R R R R % of the taxable amount above R R and above R % of the taxable amount above R Your cash lump sum amount is significantly reduced by tax. Example 1: If you take a cash lump sum of R , you will pay R to SARS (18% of R ). Example 2: If you take a cash lump sum of R , you will pay R to SARS (R R54 000). Non-qualifying retrenchments and dismissals A non-qualifying retrenchment means that your instruction will be taxed according to the withdrawal tax tables. All previous withdrawals (including retirement cash lump sums and severance benefits) are taken into account when calculating how much tax you will pay. HOW MUCH YOU WITHDRAW HOW MUCH TAX YOU WILL PAY R0 - R % R R % of the taxable amount above R R R R % of the taxable amount above R R and above R % of the taxable amount above R Your withdrawal amount is significantly reduced by tax. Example 1: If you withdraw R , you will pay R to SARS (18% of R ). Example 2: If you withdraw R , you will pay R to SARS (R R37 800). A withdrawal instruction cannot be cancelled Many retirement fund members change their minds about making a withdrawal once they see how much they will be taxed. It is important to realise that you cannot cancel your instruction once you have submitted it. We apply for a tax directive when we receive a withdrawal instruction. In terms of legislation, once a tax directive has been applied for the instruction cannot be cancelled. The taxable amount stipulated on the directive is final and will be paid to SARS from your account and the balance of your requested withdrawal amount will be paid to you. HOW TO MAKE A WITHDRAWAL 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Any remaining balance must be transferred to another retirement fund. Transfer to the Allan Gray Retirement Annuity by completing and signing the Retirement Annuity Fund Application instruction. Transfer to the Allan Gray Pension/Provident Preservation Fund by completing and signing the Pension and/or Provident Preservation Fund Application instruction. 5 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER?

7 RETIREMENT DRAWING AN INCOME In order to draw an income, you will need to transfer your retirement savings into an income providing product, such as the Allan Gray Living Annuity (LA). You may also move your retirement savings to an income providing product offered by a different financial services provider. What are the benefits of choosing this option? You choose how much income to draw, within the legal limits. You can change your income amount and frequency every year. You can choose from our simple range of unit trusts and you can change your selection when you need to, no transaction fees and no penalties. Any money left in your LA when you die can be left to your beneficiaries and can be paid immediately, without waiting for your estate to be wound up. Important points to consider: Your income is not guaranteed. It depends on your investment value and the return you earn. If your investment value drops, or you do not earn enough return, you may need to draw a lower income than you would like. If you draw too high an income, your investment might not last. Investment performance fluctuates over the short to medium term. You take on the risk that your investment may not perform as you expect. HOW TO START DRAWING AN INCOME 1. Complete and sign the Retirement Notification instruction. 2. Complete and sign the Living Annuity Application instruction. TAKING A CASH LUMP SUM When you retire, you have the option of taking up to a maximum of one third of your retirement savings as a cash lump sum. The balance must be transferred to an income-providing product, such as the Allan Gray Living Annuity. If your investment value is less than R , you may take the full amount as a cash lump sum. All previous withdrawals (including retirement cash lump sums and severance benefits) are taken into account when calculating how much tax you will pay. CASH LUMP SUM AMOUNT HOW MUCH TAX YOU WILL PAY R0 - R % R R % of the taxable amount above R R R R % of the taxable amount above R R and above R % of the taxable amount above R Your cash lump sum amount is significantly reduced by tax. Example 1: If you take a cash lump sum of R , you will pay R to SARS (18% of R ). Example 2: If you take a cash lump sum of R , you will pay R to SARS (R R54 000). ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? 6

8 A cash lump sum instruction cannot be cancelled Many retirement fund members change their minds about taking a cash lump sum once they see how much they will be taxed. It is important to realise that you cannot cancel your instruction once you have submitted it. We apply for a tax directive when we receive a retirement instruction. In terms of legislation, once a tax directive has been applied for the instruction cannot be cancelled. The taxable amount stipulated on the directive is final and will be paid to SARS from your account and the balance of your requested lump sum amount will be paid to you. Can I take more than one third of my retirement savings as a cash lump sum if I am invested in a Provident Fund? If you are invested in the Allan Gray Umbrella Provident Fund (your account number will start with AGUP), you can choose how much of your savings you want to take as a cash lump sum and how much, if any, you want to transfer to an income providing product, such as a living or life annuity. The tax implications on cash lump sums may be significant and in terms of SARS rules, once you submit your instruction you cannot retract it. It is important that you understand these tax implications before you submit an instruction. HOW TO TAKE A CASH LUMP SUM 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Any remaining balance will need to be transferred to another Fund. If you would like the balance to be transferred to the Allan Gray Retirement Annuity, complete and sign the Retirement Annuity Fund Application instruction. If you would like the balance to be transferred to the Allan Gray Pension/Provident Preservation Fund, complete and sign the Pension and/or Provident Preservation Fund Application instruction. 7 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER?

9 DISABILITY If you become permanently disabled, you can request approval for early retirement from the trustees of the Allan Gray Umbrella Retirement Fund. You will need to complete a request for approval of early retirement form and will need to submit a report by a medical practitioner, confirming your permanent disability. Once your request for early retirement has been approved, you will be able to draw an income or take a cash lump sum. DRAWING AN INCOME In order to draw an income, you will need to transfer your retirement savings into an income providing product, such as the Allan Gray Living Annuity (LA). You may also move your retirement savings to an income providing product offered by a different financial services provider. What are the benefits of choosing this option? You choose how much income to draw, within the legal limits. You can change your income amount and frequency every year. You can choose from our simple range of unit trusts and you can change your selection when you need to, no transaction fees and no penalties. Any money left in your LA when you die can be left to your beneficiaries and can be paid immediately, without waiting for your estate to be wound up. Important points to consider: Your income is not guaranteed. It depends on your investment value and the return you earn. If your investment value drops, or you do not earn enough return, you may need to draw a lower income than you would like. If you draw too high an income, your investment might not last. Investment performance fluctuates over the short to medium term. You take on the risk that your investment may not perform as you expect. HOW TO START DRAWING AN INCOME 1. Complete and sign the Retirement Notification instruction. 2. Complete and sign the Living Annuity Application instruction. TAKING A CASH LUMP SUM If you qualify for early retirement, you have the option of taking up to a maximum of one third of your retirement savings as a cash lump sum. The balance must be transferred to an income-providing product, such as the Allan Gray Living Annuity. If your investment value is less than R , you may take the full amount as a cash lump sum. All previous withdrawals (including retirement cash lump sums and severance benefits) are taken into account when calculating how much tax you will pay. CASH LUMP SUM AMOUNT HOW MUCH TAX YOU WILL PAY R0 - R % R R % of the taxable amount above R R R R % of the taxable amount above R R and above R % of the taxable amount above R ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? 8

10 Your cash lump sum amount is significantly reduced by tax. Example 1: If you take a cash lump sum of R , you will pay R to SARS (18% of R ). Example 2: If you take a cash lump sum of R , you will pay R to SARS (R R54 000). A cash lump sum instruction cannot be cancelled Many retirement fund members change their minds about taking a cash lump sum once they see how much they will be taxed. It is important to realise that you cannot cancel your instruction once you have submitted it. We apply for a tax directive when we receive a retirement instruction. In terms of legislation, once a tax directive has been applied for the instruction cannot be cancelled. The taxable amount stipulated on the directive is final and will be paid to SARS from your account and the balance of your requested lump sum amount will be paid to you. Can I take more than one third of my retirement savings as a cash lump sum if I am invested in a Provident Fund? If you are invested in the Allan Gray Umbrella Provident Fund (your account number will start with AGUP), you can choose how much of your savings you want to take as a cash lump sum and how much, if any, you want to transfer to an income providing product, such as a living or life annuity. The tax implications on cash lump sums may be significant and in terms of SARS rules, once you submit your instruction you cannot retract it. It is important that you understand these tax implications before you submit an instruction. HOW TO TAKE A CASH LUMP SUM 1. Complete and sign the Umbrella Retirement Fund Member Exit instruction. 2. Any remaining balance will need to be transferred to another Fund. If you would like the balance to be transferred to the Allan Gray Retirement Annuity, complete and sign the Retirement Annuity Fund Application instruction. If you would like the balance to be transferred to the Allan Gray Pension/Provident Preservation Fund, complete and sign the Pension and/or Provident Preservation Fund Application instruction. 9 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER?

11 CONTACT DETAILS Please contact our Client Service Centre on , or visit Physical address: 1 Silo Square V&A Waterfront Cape Town 8001 Postal address: PO Box V&A Waterfront Cape Town 8002 ALLAN GRAY UMBRELLA RETIREMENT FUND - WHAT HAPPENS WHEN I LEAVE MY EMPLOYER? 10

12 1 Silo Square V&A Waterfront Cape Town 8001 P O Box V&A Waterfront Cape Town 8002 South Africa Client Service Centre Tel: or +27 (0) Client Service Centre Fax: or +27 (0) info@allangray.co.za