CONSOLIDATED RETIREMENT FUND (CRF) FOR LOCAL GOVERNMENT CLIENT PROCEDURE FILE 2017/18

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2 CRF Client Procedure File 2017/18 Page 2 of 85 CONSOLIDATED RETIREMENT FUND (CRF) FOR LOCAL GOVERNMENT CLIENT PROCEDURE FILE 2017/18 Contents Page PLEASE NOTE: 7 INTRODUCTION AND WELCOME 8 INDEMNITY 8 BENEFIT STRUCTURE OVERVIEW 9 CRF SECTION DEFINITION OF A NEW EMPLOYEE. 9 CRF BENEFIT STRUCTURE OVERVIEW FOR NEW MEMBERS 10 RISK BENEFIT CATEGORIES 12 MEMBER COMMUNICATION 15 MEMBER BENEFIT STATEMENT 15 NEWSLETTERS 15 WEBSITE 15 MEMBER EDUCATION WORKSHOPS/HELPDESK 16 FUND CONTACT INFORMATION 17 CALL CENTRE 17 MANAGEMENT OF THE FUND 18 PRINCIPAL OFFICER 18 DEFINED BENEFIT VS. DEFINED CONTRIBUTION FUNDS 18 Risk Comparison 18 Cross-Subsidies 19 Age Cross-Subsidy 19 Marital Status Subsidy 19 Stayers vs. Leavers Subsidy 20 Implications of Cross-Subsidies 20 Retirement Planning 21 Treatment of Death and Disability Benefits 21

3 CRF Client Procedure File 2017/18 Page 3 of 85 PENSION VS. PROVIDENT FUNDS 21 INSURED BENEFIT CATEGORIES 22 FINANCIAL INFORMATION: INVESTMENT RETURNS 23 GENERAL 23 PROCEDURE FOR A NEW EMPLOYEE 24 HOW TO COMPLETE THE NEW MEMBER APPLICATION FORM 24 HOW TO COMPLETE THE DEPENDANTS AND BENEFICIARIES NOMINATION FORM 25 NEW MEMBER WELCOME LETTER 26 PROCEDURE FOR PAYMENT OF CONTRIBUTIONS 26 METHOD OF PAYMENT 26 MEMBER INFORMATION REQUIREMENTS 26 MEMBERS WHO ARE PENDING DISABILITY CLAIMS, ABSENT, OR ON UNPAID LEAVE 27 SALARY REDUCTIONS 27 SECTION 13A OF THE PENSION FUNDS ACT 27 PROCEDURE FOR COUNCILLORS 30 JOINING THE FUND 30 CONTRIBUTION RATES 30 EXITING THE FUND 30 PROCEDURES ON EXIT 31 OVERVIEW OF DEDUCTIONS FROM BENEFITS 33 RESIGNATION/DISMISSAL 34 Introduction 34 What form needs to be completed? 34 What supporting documents must be attached? 34 Deductions from benefits 34 Payment options on Resignation/Dismissal/Retrenchment 35 RETIREMENT 36 Introduction 36 What form needs to be completed? 36 What supporting documents must be attached? 36 Deductions from benefits 36 Options on Retirement 36 DEATH 37 Introduction 37 What forms need to be completed? 37 To avoid delays in the claim process, please supply us with the following supporting documents: 37 Deductions from benefits 38 Disposal of death benefits 38 Payment options 38 Trust/beneficiary funds 38 What are the benefits of setting up a beneficiary fund or trust? 39 Section 37C of the Pension Funds Act 39 DISABILITY 42 Introduction 42 What forms need to be completed? 42 What supporting documents must be attached? 42 Understanding the Fund s insured disability product 42

4 CRF Client Procedure File 2017/18 Page 4 of 85 Implications 43 What is the difference between permanent and temporary disablement? 43 Definition of disability 43 Deadline for notifying the Fund of a claim 44 A claim should be submitted when: 45 The claim waiting period 45 Consequences of a delay in submitting the claim forms and documentation 45 Appealing the decision of a declined claim 47 Deductions from benefits 47 Frequently asked questions 47 FUNERAL BENEFIT CLAIM 47 Introduction 47 What form needs to be completed? 48 What supporting documents must be attached in the case of death of a: 48 Your checklist to save you time 49 How to claim for the repatriation benefit 49 DREAD DISEASE BENEFIT 49 Introduction 49 What forms need to be completed? 49 What supporting documents must be attached? 50 Claim Procedure 50 REORGANISATION / REDUNDANCY / RETRENCHMENT 52 Introduction 52 What form needs to be completed? 53 What supporting documents must be attached? 53 Deductions from benefits 53 PROCEDURE ON TRANSFER 54 Introduction 54 Required forms and supporting documents for transfers 55 Housing Loans on Transfer 56 Section 14 of the Pension Funds Act: implications on transfer to another fund 56 OTHER FUND BENEFITS 58 FNB SMART HOUSING PLAN 58 Background 58 Interest Rates 58 Applying for an FNB Smart Housing Plan loan 58 Qualifying criteria 58 Smart Housing Plan Loan - Application procedure 59 Steps to follow: 59 Members should understand that: 59 What supporting documents must be attached? 60 For All Cases: 60 Purchasing: 60 Building or Renovating: 61 Defaulting on the repayment of a housing loan 61 Pros and Cons of Surety Agreement vs. Direct Loan 62 FAMILY ASSISTANCE BENEFIT 63 VALUE ADDED BENEFITS (VABS) 64 EXTENDED FUNERAL COVER FOR YOUR FAMILY 64 How to apply for the Extended Funeral Cover 64

5 CRF Client Procedure File 2017/18 Page 5 of 85 When will the cover start? 64 How to claim on the Extended Funeral Cover? 65 Important criteria to remember 65 FNB HOUSING LOAN FOR INCOMES OF R3 500 R PER MONTH 66 Who qualifies for this benefit? 66 How can this benefit help first-time homebuyers? 66 How does a member apply for the loan? 66 Interest Rate 66 Loan repayments 66 INVESTMENT PORTFOLIOS AVAILABLE TO MEMBERS 67 SWITCHING PORTFOLIOS 68 SWITCHING DEFINITIONS AND ALLOWANCES 69 Investment Risk for the different Portfolios 69 Asset Classes 69 Suitability 70 Frequency of Switches 70 Switch Percentage Options 71 FUND INFORMATION 72 FUND GOVERNANCE 72 Associated parties 72 Administrators 72 Investment Managers 73 Principal Officer 73 Actuary 73 Consultants 74 Auditors 74 Financial Services Board (FSB) 74 Trustees 74 Pension Funds Adjudicator 75 The Adjudicator can be contacted as follows: 75 Risk-benefit providers 75 South African Revenue Services (SARS) 75 Unions 75 SALGBC (South African Local Government Bargaining Council) 76 Ombudsman for Long Term Insurance 76 FUND COMMUNICATION WITH MEMBERS 76 Member benefit statements 76 Annual report 77 Pensioner Information 77 Communication to pensioners 77 Pension increases 77 Procedure when a pensioner dies 77 Proof of age and education certificates for children s pensions 77 LEGISLATION 79 THE PENSION FUNDS ACT NO. 24 OF Regulations to the Act 79 PENSION FUNDS (PF) CIRCULARS 79 THE INCOME TAX ACT

6 CRF Client Procedure File 2017/18 Page 6 of 85 THE DIVORCE ACT 80 Date of accrual: 80 Divorce orders granted before 13 September 2007: 80 Divorce orders granted on or after 13 September 2007: 80 The value of the pension interest 81 A previous divorce 81 Applicable marriages 81 OTHER RELEVANT ACTS 81 THE RULES OF THE FUND 82 DISPUTE RESOLUTION 82 TAXATION 82 The tax-deductibility of contributions 82 The taxation of benefits 83 RETIREMENT 83 DEATH 83 DISABILITY 83 WITHDRAWAL/RESIGNATION/DISMISSAL 83 OTHER TAX ISSUES 84 Registration of taxpayers 85 Retrenchment/redundancy over age Date of accrual for tax purposes: 85

7 CRF Client Procedure File 2017/18 Page 7 of 85 Please note: 1. Reasonable care has been exercised in compiling this document. The Consolidated Retirement Fund for Local Government does not accept liability for any loss, damage or expense that may be incurred as a direct result or consequence of reliance upon the information in this document. If there is any conflict between the information in this document and the Rules of the Funds, then the Rules of the Funds will prevail. 2. The contents are based on the Funds benefit structures as at 1 July Changes after this date will be communicated via the monthly HR newsletters and updated in the next volume of the Client File. 3. The contents are based on the Pension Funds Act, the Income Tax Act, and other relevant legislation. This legislation may change from time to time. 4. All the claim forms mentioned in the Client File are available on the Fund s website on

8 CRF Client Procedure File 2017/18 Page 8 of 85 INTRODUCTION AND WELCOME Welcome to the Consolidated Retirement Fund for Local Government (CRF). The Fund appreciates the amount of co-operation and hard work that is required from our Human Resources counterparts at the various local authority offices. As a result, we have developed the Client File, exclusively for your benefit. The primary purpose of this document is to consistently keep you up to date with the CRF benefits, protocols, and procedures. In so doing we are hoping to further improve our working relationship with you and at the same time improve the service offered to our members, especially when claiming a benefit. We are available to provide you with training on any aspect of this document. Training can be arranged at your convenience to take place at your offices. Should you leave the Human Resources department, please arrange that the individual replacing you is booked for similar training. A technical document such as this takes many months to revise so in the interests of maintenance we have kept the material in English. We will keep you updated with any changes in the industry via your monthly HR newsletter. Our call centre operators have been intensively trained on the file. Should you have any queries, please feel free to contact us on 0861 CRFUND (273863) or via at support@crfund.co.za. The CRF has a long history of providing excellent employee benefits to employees of Local Authorities nationally. As of June 2017, the assets of the Fund were in excess of R22.2 billion, and the Fund has a membership base of more than members. It is our pleasure to welcome you to our administration processes, and we look forward to being of meaningful assistance to you. Indemnity The CRF and SASH Consulting do not accept liability for any loss, damage or expense that may be incurred as a direct result or consequence of reliance upon the information in this document. If there is any conflict between the information in this document and the Rules of the Consolidated Retirement Fund, then the Rules of the Fund will prevail. If in doubt about any of the information, please contact the Fund s Member Centre on 0861CRFUND (273863) or refer to the Rules of the Fund, which are available on the Fund s website Helping you manage your future!

9 CRF Client Procedure File 2017/18 Page 9 of 85 BENEFIT STRUCTURE OVERVIEW CRF SECTION 2007 The CRF Rules were amended on 1 August 2006 for the City of Cape Town ex-contract members and on 1 January 2007 for all other new employees. Definition of a new employee. An employee, who either at the time of joining the Fund was employed on a contract with the City of Cape Town, or who, has subsequently been newly employed by the City of Cape Town from 1 August 2006 and where the City of Cape Town has applied to the Fund for the employee to join this new membership category. This definition is expanded to include all employees employed by any Local Authority and who elect to join the Fund with effect from 1 January A new employee excludes a Municipal Manager or any other member who has been appointed in terms of Section 57 of the Municipal Systems Act, 2000 and whose contract of employment contains specific provisions relating to Fund benefits. Certain provisions of the Fund rules as explained in this Client File may not apply to a new employee, depending on the person s contract of service. The following rules may impact a new employee : Contribution rates the rates contained in the Fund rules may change if agreed to by the South African Local Government Bargaining Council (SALGBC). Retrenchment Benefit the portion payable by the Local Authority will only apply to a new employee if contained in their contract of service. Retirement age This depends on the member s contract of service. A new employee, especially employees employed by City of Cape Town after 1 August 2006 shall retire at age 60 unless an alternative retirement date is expressly provided for in their contract of service.

10 CRF Client Procedure File 2017/18 Page 10 of 85 CRF BENEFIT STRUCTURE OVERVIEW FOR NEW MEMBERS Summary: CRF Benefits FOR CITY OF CAPE TOWN NEW MEMBERS 1 August 2006 and all members who joined the Fund after 1 January 2007, please refer to CRF Section 2007 on page 9. Benefits Retirement benefits CRF New benefits On retirement, the following benefit is payable: A cash lump sum equal to your member s share account in the Fund. The member s share account is comprised of the following: Member contributions to the Fund Participating employer contributions in respect of retirement benefits Any amounts transferred into the Fund by the member Investment income (positive or negative) earned by the Fund With effect 1 January 2016, the option to purchase a monthly pension within the Fund was closed. This means that members retiring after 1 January 2016 will have to buy a pension outside of the Fund, should they wish to receive a monthly pension. Please contact your financial advisor for assistance. In terms of the rules of the Fund, retirement is allowed from the age of 50. Please note that the Income Tax Authorities may treat a retirement before age 55 as a resignation and not a retirement, with consequent adverse tax implications. A member may defer retirement to age 65 without the consent of the Local Authority; after age 65, consent is required from the Local Authority, subject to the member s contract of service.

11 CRF Client Procedure File 2017/18 Page 11 of 85 Resignation benefits A cash lump sum equal to the member s share account in the Fund is paid. The member share account is comprised of the following: Member contributions to the Fund; Participating employer contributions in respect of retirement benefits; Any amounts transferred into the Fund by the member; Investment income (positive or negative) earned by the Fund. Retrenchment benefits A cash lump sum equal to: An amount payable by the Local Authority (participating employer) concerned (and for which it alone shall be liable to the member), being the lesser of: a) The difference between the age of 65 years and his age on his nearest birthday, multiplied by 8%, multiplied by the member share, or b) 100% of member share provided that the amount payable by the Local Authority (participating employer) may be reduced if the member agrees thereto in writing. This benefit comprises of two sections: The Local Authority s liability and the Fund s liability. The Fund will only pay the Local Authority s portion once this part has been paid across by the Local Authority to the Fund.

12 CRF Client Procedure File 2017/18 Page 12 of 85 RISK BENEFIT CATEGORIES The CRF offers members a choice of seven risk-benefit categories. These categories allow members to choose the amount of risk cover (death, disability, and dread disease) they have within the Fund, as well as the rate at which members save for retirement. As members need for risk cover could change, members will have the option to switch between the available risk categories. Please contact our call centre to discuss the terms and conditions or visit our website at Risk Category Death benefit cover Disability benefit cover Dread disease cover A A lump sum of 4.35 x annual pensionable salary plus member share B A lump sum of 7.35 x annual pensionable salary plus member share C D (Only available to A lump sum of 4.7 x annual pensionable salary plus member share No insured cover, only member share becomes payable A lump sum of 4.35 x annual pensionable salary plus member share A lump sum of 4.7 x annual pensionable salary plus member share No insured cover, only member share becomes payable No insured cover, only member share becomes payable A lump sum equal to 0.75 x annual pensionable salary A lump sum equal to 0.75 x annual pensionable salary A lump sum equal to 0.75 x annual pensionable salary Savings towards retirement before expenses of running the Fund Category cost Member contribution of 9% plus Employer contribution of 18% Sum contribution = 27% Member contribution of 7.5% plus Employer contribution of 18% Sum contribution = 25.5% 3% 24% 22.5% 12% 5% 22% 20.5% 10% 2% 25% 23.5% 13% No cover 0% 27% 25.5% 15% Member/ Councillor contribution of 7.5% plus Employer contribution of 7.5% Sum contribution = 15%

13 CRF Client Procedure File 2017/18 Page 13 of 85 councillors or members older than 50 years) E A lump sum of 4.25 x annual pensionable salary plus member share Risk Category F (Only available to members between years) Risk Category G A lump sum of 4.25 x annual pensionable salary plus member share A lump sum of 1 x annual pensionable salary plus member share Income Disability Benefit 75% of monthly pensionable salary limited to a maximum of R per month No insured cover, only member share becomes payable No insured cover, only member share becomes payable A lump sum equal to 0.75 x annual pensionable salary 3.25% 23.75% 22.25% 11.75% No cover 3% 24% 22.5% 12% No cover 0.6% 26.4% 24.9% 14.4% Death benefits after retirement There are no death benefits after retirement, except where members prior to 1 January 2016 elected to receive part of his/her cash lump sum at retirement as a monthly pension. In this instance, a spouse s pension equal to 60% of the member s pension at the date of death will be paid to an eligible spouse. The 60% only applies if the member has been in receipt of his/her pension for five years or more. If retired for less than five years, the higher, original pension will be paid for the balance of the five-year period, after that the pension will reduce to 60%. If a member has no eligible spouse/children, a lump sum equal to the balance of the sum of the pension payments until the expiry of five years from the date of retirement will be payable to the member s estate. If a member with no eligible spouse or children dies after five years from the time of retirement, no further benefit is payable.

14 CRF Client Procedure File 2017/18 Page 14 of 85 Funeral Cover Insured Person Funeral Cover Amount Important Factors to Consider Member, spouse, and children (11 26) R Provided that the child is unmarried if under the age of 21 or is unmarried and a full-time student if under the age of 26. Children (1-11) R Children (0-1) R6 500 Stillborn babies are also covered, provided that the pregnancy term is between 26 weeks and full gestation. Extended Funeral Cover: Members of the CRF can also take out the extended funeral cover for their immediate families, as well as cover for parents, parents-in-law and 9 other family members. Please read more by referring to The Extended Funeral Cover value added benefit on page 64.

15 CRF Client Procedure File 2017/18 Page 15 of 85 MEMBER COMMUNICATION The Fund believes that communication with its members is vital. This section explains how the Fund will communicate with the member. Communication is a two-way process and the Fund values comments and suggestions from its members. Member Benefit Statement Once a year, within six months of the financial year-end of the Fund (30 June), an individual member benefit statement will be sent to members. This is an important document that sets out the member s Fund benefits. By comparing each benefit statement, members are able to see how their benefits have changed over the past year. The Fund must be notified of any incorrect data, for example, a wrong date of birth or ID number; so that the member s personal information can be rectified. Newsletters Website The Fund sends out newsletters to active members three times per year and to pensioners once a year. These contain articles of interest to the members and advise of any recent legislation changes that may affect their benefits. The Fund s website is at: and is a central hub of information. The site is made up of two sections, namely a general information section and a specific member enquiry section. No user identity is required to access the general information section. The general information section contains both member, employer and pensioner related information that can be accessed quickly through user-friendly links supplied. An additional feature of our website is the Member Portal Section. This is where members can privately access their personal details, such as their value in the Fund (the member s share account). Members are able to make specific enquiries, update their contact information online and check that their beneficiaries are updated. Personal details are obviously confidential, and only the member will have password protected access to them. Likewise, members will not be able to access any other member s information. To make use of this facility, members must register online. To register for the member portal, members will need to follow these easy steps: Visit the Fund s Website Select the my portfolio button Click on the Register/OTP button Enter your RSA Identity Number and click on next Complete your personal details and click on next Enter your unique user name this is your address and select a password communication preference of either sms or Accept the terms and conditions and click on next Enter your unique OTP number which will be sent to you via sms or The registration process is now complete and you will be requested to select your password The system will prompt you to change the password to the password of your choice.

16 CRF Client Procedure File 2017/18 Page 16 of 85 Another unique feature of the CRF website is the Employer Portal. This portal will enable registered HR officers to upload the monthly schedules and claim forms (excluding funeral, dread disease, and disability claims) electronically. To register for the employer portal, you will need to follow these steps: Contact our member centre on 0861 CRFUND ( ) and request a copy of the employer portal registration form Complete all the required sections of the form Please submit completed form to support@sash.co.za Once the form has been submitted, MRA will be in contact with you to provide you with your registration login details Momentum App The Momentum App allows CRF members to access their Fund information conveniently. The app will allow CRF members to view the following from their cell phone: Personal Information as per the Fund s records Summarised statement of Fund value which can also be ed to the member Transaction and contribution statements allows members to view contributions received and allocated to their accounts Investment Portfolios available to CRF members The Fund s investment product daily unit prices How to download the app? Visit your app store Search Momentum App, download and accept Open the App and enter your name and password, click on login Please note that CRF members will be required to register on the member portal first before logging in via the mobile App. Member education workshops/helpdesk The CRF is available to visit Local Authorities to conduct member education workshops, make presentations at inductions, and assist with any Fund related queries from members or HR officers.

17 CRF Client Procedure File 2017/18 Page 17 of 85 FUND CONTACT INFORMATION Call Centre The Fund has an established call centre to assist with member and HR queries. The consultant assisting will attempt to answer queries immediately. If the question needs some investigation, a response will be provided within two working days. Confidential information cannot be supplied over the phone, for security reasons; this must be requested in writing, by letter or . The Fund s contact information is as follows: Call Centre Telephone: 0861 CRFUND (273863) Address: support@crfund.co.za Postal Address: PO Box 4740, Tyger Valley, 7536 Physical Address: Website Address: CRF, Combined Head Quarters, 2 nd Floor, 4 Bridal Close, Tyger Falls, Bellville,

18 CRF Client Procedure File 2017/18 Page 18 of 85 MANAGEMENT OF THE FUND The Fund is managed by a Board of Trustees which comprise of member-elected and Local Authoritynominated (Councillor) Trustees and Independent Trustees. Trustees are elected for a five-year period and may stand for re-election. The Trustee election process is set out in the Rules of the Fund. Trustee meetings are held approximately six times per year or more frequently if necessary. The Trustees serve on various committees which are assigned to focus on particular tasks within the Fund. A committee would generally make recommendations to the complete Board of Trustees for approval. To see who the Trustees are in your area, or for more information on the Committees please visit the Fund Management section on our website Principal Officer Mr. Kobus Sadie is the Principal Officer of the CRF. The Principal Officer s task is to administer the business of the Fund and to implement the resolutions, policies and strategies adopted by the Board of Trustees. The Principal Officer shall be responsible for the statutory duties set out in the ACT as well as the functions specified in his contract of employment and/or as determined by the Board of Trustees from time to time. Defined Benefit vs. Defined Contribution funds Not all funds are the same; there are a variety of ways in which they can be set up. Legislation facilitates and controls these characteristics, two of which are termed defined benefit and defined contribution Many members are confused by the terms defined benefit fund and defined contribution fund. It is important to understand the differences, as this determines how their retirement benefits are calculated. The CRF is a defined contribution fund. Some Local Government Funds are defined benefit funds. Further, the CRF is recognised by SARS as a provident fund as the retirement benefit is paid as a lump sum. Note that not all provident funds are defined contribution funds. Provident funds can be defined benefit or defined contribution funds. In the interests of transparency and to allow the many aspects to be weighed up, we have included a general comparison between defined benefit and defined contribution funds, relating to the following elements: Risk Comparison Defined Benefit Fund In a defined benefit fund, the benefits on retirement are specified in the rules of the fund and this benefit is linked to the member's salary at or near retirement.

19 CRF Client Procedure File 2017/18 Page 19 of 85 The employee contribution rate is defined in the Rules and the Local Authority (employer) is liable to meet the balance of the cost to provide the specified benefits. The actual cost to the Local Authority will depend on the investment return earned on the assets of the fund the higher this return, the lower the Local Authority s cost. Defined Contribution Fund In a defined contribution fund, the Local Authority (employer) and employee contribution rates allocated for retirement saving purposes are specified in the rules. Therefore, the total gross contribution rate is specified in the rules of the fund. These retirement-saving contributions accumulate with the investment return earned on the fund's assets to provide a benefit on retirement the operation of this arrangement is thus like that of a savings account. The benefit the member receives at retirement depends on the investment returns earned on the retirement funding contributions. Investment performance has a direct bearing on the amount of the final benefit payable to the member. Thus, in a defined contribution fund the member enjoys the benefit of good investment returns, but also carries the investment risk. In the past, it was an advantage and not a risk to bear the investment risk, as investment returns were much higher than inflation. Provided that investment returns continue to exceed inflation by some 4% to 5% per annum, a defined contribution fund should provide good retirement benefits, provided members contribute to the fund for a sufficient period of time. Cross-Subsidies There are a number of cross-subsidies inherent in defined benefit funds that are substantially less in a defined contribution fund. These cross-subsidies are discussed below. Many people feel that most cross-subsidies are undesirable people want their benefits to reflect what their due is. The elimination of these cross-subsidies is one of the main attractions of a defined contribution fund. Age Cross-Subsidy Defined Benefit Fund In a defined benefit fund, the assets are pooled for all members and cross-subsidisation takes place from the younger to the older members. Effectively, the Local Authority (employer) contributes more for the older members and less for the younger members. The higher contribution rate for older members arises because: o There is a shorter period to earn an investment return on the money until retirement. o The actuary is more confident that an older member will, in fact, retire (and not o resign). The effect of the cross-subsidy on withdrawal benefits that existed in many funds was eliminated with the introduction of legislation of minimum benefits. Defined Contribution Fund In a defined contribution fund a separate account is held for each member and the Local Authority (employer) pays the same contribution rate for all in-service members. Therefore, no cross-subsidisation takes place from the young to the old. Marital Status Subsidy Defined Benefit Fund

20 CRF Client Procedure File 2017/18 Page 20 of 85 A defined benefit fund provides enhanced benefits for married persons and not for unmarried persons. For example, if you are married at retirement date, your spouse (if he/she survives you) will receive a pension on your death. Defined Contribution Fund The rules of the defined contribution fund eliminate all discrimination on the basis of marital status. Members are entitled to the full retirement saving that they have built up. Stayers vs. Leavers Subsidy Defined Benefit Fund Previously, the rules of a defined benefit fund provided a low resignation benefit. Members who resigned were thus cross-subsiding members who stayed until retirement. The resignation benefit in the funds rules was amended to comply with the Pension Funds Second Amendment Act on minimum benefits, and this subsidy has been eliminated. Defined Contribution Fund The rules of a defined contribution fund treat leavers and stayers the same. Members are entitled to the full retirement saving that has built up for them even if they resign. Implications of Cross-Subsidies The main consequences of the above cross-subsidies are: Defined Benefit Fund o Does not promote transparency many of these cross-subsidies are not visible. o It is difficult to allow for member flexibility for example, if the member wishes to change his/her retirement savings contributions, it is not immediately obvious what the impact will be. Defined Contribution Fund The removal of cross-subsidies has several advantages, namely: o The Local Authority pays the same contribution rate in respect of all members and therefore there is perceived fairness with respect to the employer contributions. o Defined contribution funds are easy to understand, since they operate similarly to a savings account. o Greater flexibility is accommodated for example if the member wishes to increase his/her retirement funding contributions, his/her savings account naturally builds up with the additional voluntary contributions

21 CRF Client Procedure File 2017/18 Page 21 of 85 Retirement Planning Defined Benefit Fund Because the benefits of a defined benefit fund are specified in the fund rules, it provides more predictable benefits in real terms on retirement. This facilitates easier retirement planning. Defined Contribution Fund In a defined contribution fund the benefits on retirement are unpredictable and have to be projected using assumptions. This makes retirement planning more difficult. Treatment of Death and Disability Benefits Defined Benefit Fund In a defined benefit fund, the risk benefits are specified according to a set formula and the Local Authority (employer) needs to meet its cost provided that, in total, the cost of all benefits of the Fund does not exceed the employer s contributions as stipulated in the rules. Defined Contribution Fund The rules of the defined contribution fund provide for the different death and disability benefit options to be provided on a defined contribution basis. In the CRF this means that the costs of the death and disability benefits vary according to which risk-benefit category the member elects. Therefore, the member can, within the categories offered, determine how much of the Local Authority contribution rate goes towards retirement benefits. The amount of death and disability cover that can be provided by these contributions will be assessed on an annual basis. If the claims experience of the Fund is inadequate in future, less cover may be provided for the same contribution rate. The member bears the risk (and opportunity) of the future death and disability claims experience. Thus, more risk (and opportunity) is shifted to the member in a defined contribution arrangement. Pension vs. Provident Funds Pension Funds The main features of pension funds are as follows: o o o o A pension fund can have either a defined benefit or a defined contribution arrangement. On retirement from a pension fund, a member may take a maximum of one-third of his/her benefit in the fund in cash the balance of the member s benefit must be payable as a pension. If a member has less than R , the member may take it all in cash. The main advantage of a pension fund is that it gives a steady income in retirement provided the member receives reasonable annual increases in his/her pension. It also provides for better security for dependents. The disadvantage of a pension fund is that it restricts the usage of the member's retirement proceeds to the provision of a pension, which may not suit all members needs. This is not a significant disadvantage because members can now tailor their pension to suit their needs. Once in receipt of a pension, the pension may not be

22 CRF Client Procedure File 2017/18 Page 22 of 85 capitalised and paid out as a lump sum. Provident Funds The main features of provident funds are as follows: o A provident fund can be either a defined benefit or a defined contribution arrangement. o On retirement from a provident fund, a member may receive any combination of a monthly pension or lump sum benefit. For example, the entire member share can be paid as a lump sum benefit or alternatively, the full member share can be converted into a pension benefit outside the Fund. o The Taxation Laws Amendment Act, 2013 which came into effect on 1 March 2016, means that employer contributions to retirement funds will be taxed as fringe benefits in the hands of employees, with members enjoying a corresponding deduction for member and employer contributions up to a maximum of 27.5% of the greater of remuneration or taxable income. o The main advantage of a provident fund is that it gives the member flexibility as to the use of his/her retirement capital. Cash can be converted to income. o The disadvantage of a provident fund is that the member may squander his/her retirement capital and become destitute in old age. Insured Benefit Categories The CRF offers members the choice of various benefit options in the event of death, disability or dread disease. This is a valuable flexibility, as it enables members to choose the benefit structure that best suits them and their dependants. The categories A, B, C, D, E, F and G are set out in the Risk Benefit Category section at the beginning of this document. The cost of each category is pre-determined. The most expensive category is Category B and the least expensive is Category G (Category D has no risk benefits and hence incurs no cost). This means that more of the Local Authority s contribution is available for retirement benefits in Category D as compared to the other categories. Category D is only available to members over the age of 50 years and councillors. A member may change his/her category (in terms of the Policy Conditions) free of charge in the event of: marriage or divorce the birth or death of a child the death of a spouse attaining the age of 40, 50 or 60 a child reaching majority age a member s service conditions changing Members must inform the Fund in writing of any change in their choice of option within three months of any of the above events occurring. Proof of the event, e.g. a certified copy of a birth certificate, must accompany such change of option. Apart from the above events, a member may choose to change his/her risk category once a year, in the prescribed format before 30 April, in order for the new category or option to be effective from 1 July. An administration fee will be charged. The insurer may require medical underwriting.

23 CRF Client Procedure File 2017/18 Page 23 of 85 The death, disability (lump sum and monthly income) and dread disease benefits are insured with an insurance company, currently Momentum. This has the following advantages: The risk is carried by the insurer; not the Fund. The members are protected, as insuring the benefit ensures that there is cash flow available to pay claims. Members do not pay insured benefit premiums, the employer does (it is paid from the gross Local Authority contribution). The Fund is protected as the benefit is insured. The Fund cannot use members retirement monies to pay the death, disability or dread disease claims of other members. The fact that the risk is carried by the insurer also means that several large claims cannot damage the Fund. The employer is protected against an increase in contributions in order to pay claims. Correct assessment of disability claims will result in only valid claims being paid, which will ensure that premiums are reasonable. This benefits members, as the most efficient balance, is struck between the portion of the employer s contribution going towards risk-benefit premiums, and the portion going towards retirement benefits. Financial Information: Investment Returns Investment returns are critical to members, as this is a defined contribution fund. This was set out in the section where we discussed the difference between defined benefit funds and defined contribution funds with regard to investment opportunity and risk. The CRF endeavours to be the leader in the industry, and the latest information on investment returns can be found on the Fund s website under Investments. Unitisation 1. On 1 September 2016 a member s fund value as at 31 August 2016 was converted to a number of units equal to the member s value in the Fund. For example, if the member s fund value on 31 July was R then the member would have had units at R1 each, as at 1 September The August 2016 fund interest was allocated to the member s fund value as at 30 September 2016 and that amount was used to purchase additional units for the member. 3. In terms of legislation, member and employer contributions must be paid into the Fund s account by the 7 th of the month and then reconciled. After reconciliation, the Fund Administrator will invest the contributions. The contributions buy additional units which are reflected in the member s fund value. The number of units purchased is determined by the unit price on the day of investment and the investment portfolio(s) the member chooses. 4. The number of units remains constant throughout the month and only increases once per month, when contributions are invested. 5. Unit prices go up or down every day depending on the performance of the investment portfolios; therefore, the member share value will change daily instead of once per month as was the case under the old arrangement when the Fund s interest was declared monthly in arrears. 6. The fund value is calculated by multiplying the number of accumulated units (Unit Running Total) by the unit price on the day. General We trust that this has given you an insight into the CRF. Should you need any further information, please contact our call centre - CRF Helpdesk 0861CRFUND (273863) or queries to support@crfund.co.za.

24 CRF Client Procedure File 2017/18 Page 24 of 85 The staff assisting you will attempt to answer your query immediately. If the question needs further investigation, they will come back to you within two working days. Alternatively, you can send a letter or the Fund at support@crfund.co.za. The Fund s postal address is PO Box 4740, Tyger Valley, The Fund s physical address is 2 nd Floor, Combined Head Quarters, 4 Bridal Close, Tyger Falls, Bellville, PROCEDURE FOR A NEW EMPLOYEE It is normally a condition of service that all new employees become members of a fund approved by the Local Authority. As soon as the new employee joins service, a New Member Application, and Beneficiary Nomination Form must be filled in and sent to the chosen fund. This also applies to members who transfer from another fund. Please refer to the Procedure on Transfer section on page 54 for further explanation. Members join the Fund from the first day of a month. If the date of employment is after the first day of a month, the date of joining the Fund will coincide with the first day of the following month. It is important to note that the death, disability, dread disease and funeral benefits under the Fund are insured with an insurance company. Failure to send in a new member application form, or a delay in doing so, may result in any potential claim for that member being repudiated by the insurer, as the insurer will have no record of the member and no premiums will have been paid for the member. Death, disability and dread disease benefits insured with an insurance company are granted without evidence of health having to be submitted, up to the automatic acceptance limit. Cover over this amount may be granted only once medical evidence has been provided. In such event, the Fund will notify the member and give all the information that they will need. Please keep in mind that a member who joined the Fund on or after 1 January 2007 (or August 2006 for City of Cape Town employees) should take note of the definition for a new employee as explained under the Benefit Structure of CRF Section How to complete the New Member Application Form Please refer to the New Member Application Form (available from the Fund s website ( and please print neatly in capitals using a black pen this will help to ensure that the correct details are captured in the database. New member s personal details: Fill in all the member s personal details: title, surname, first names, identity number, date of birth, gender, marital status, spouse s name and date of birth, number of children, residential and postal addresses, home and work telephone numbers, cell phone number, address, preferred language for correspondence and income tax reference number. Fill in the member s bank details, i.e. name of bank, bank branch, branch code, type of account and the bank s address. Indicate whether he/she has chosen the risk benefits category A, B, C, D, E, F or G. Indicate the relevant contribution rate. All new employees joining the CRF from 1 January 2015 will

25 CRF Client Procedure File 2017/18 Page 25 of 85 have the option to contribute either 7.5% or 9% of their pensionable salary to the Fund. The employer s contribution will remain at 18%. This will allow our members the option to contribute at a lower rate, while still making provision for retirement and enjoying the benefits the CRF offers. It is important to note that members who contribute at the lower rate, will save less towards retirement. The flexible contribution rates are subject to the member s conditions of employment. The contribution rates differ for councillors and contractors. Employer Details Fill in the member s staff number, the name of the Local Authority, the date the member joined the service of the Local Authority, the date the member joined the Fund, annual taxable salary, annual pensionable salary and whether the member is a Section 57 contract employee. It is important to differentiate between taxable and pensionable salary, as the member contributions and benefits are based on pensionable salary. Transfer details If the member has transferred from another fund, the transfer details section must be completed; if not, leave it blank. The transfer section is important as it indicates whether the member will transfer his/her previous benefit into the Fund. Complete all the relevant sections: Name of previous Employer/Local Authority, former staff number, name of previous fund, membership number of previous fund, type of fund, and date of resignation. The new member form must be signed by the Local Authority official and by the member. The Fund will contact you for more details if required. How to complete the Dependants and Beneficiaries Nomination Form The CRF Dependants and Beneficiaries Nomination Form must be completed by the member. He/she must fill in all his/her personal details: surname, first names, date of birth, identity number, residential and postal addresses, work and home telephone numbers, cell phone number, fax number and address. The name of the Local Authority and Fund membership number must also be inserted. The most important information is the actual listing of dependants and nominees who are not dependants and/or details of a nominated Trust Fund, if applicable. The member must be made aware that this form is used in the event of his/her death to assist the Trustees of the Fund to ensure that the correct persons receive the benefit, e.g. those who are actually dependent on the member. Please note that the Fund will not be able to complete their investigation based on other schemes beneficiary nomination forms. All relevant details must be entered, especially when a dependant does not live at the same address as the member. Please remember that the Fund will require certified copies of all nominees and beneficiaries identity documents. The percentages of the proposed benefit allocation must add up to 100%. Please note that the Fund will not be able to accept incomplete beneficiary nomination forms. Finally, the form must be signed and dated by the member, and a witness.

26 CRF Client Procedure File 2017/18 Page 26 of 85 New Member Welcome Letter When a new member joins the Fund, and his/her details are recorded in the Fund s records, a new member welcome letter will be sent to him/her within three months of joining the Fund. The welcome letter sets out the member s details, pensionable salary, benefits in the Fund, etc. A detailed summary of the Fund s benefits and risk categories are available on the Fund s website Please note that the format of the welcome letter will depend on which insured benefit-risk category the member has chosen. This statement is similar to the annual member benefit statement, which is sent to all members once a year after the financial year-end of the Fund. PROCEDURE FOR PAYMENT OF CONTRIBUTIONS All member and Local Authority contribution payments must be paid into the Fund s bank account by the Local Authority by the seventh day of the month following the month for which it is due, e.g. by 7 February for January. This is a requirement of Regulation 33 and Section 13A of the Pension Funds Act (see below). All late payments must and will be reported to the Financial Services Board by the Fund s administrators. Late payment interest, at the prescribed rate, will be charged on all late payments or outstanding contributions. The Act also imposes personal liability on parties within the Local Authority in the event of nonpayment of deducted member contributions to a Fund. A Local Authority whose contributions are in arrears will be prosecuted, and criminal action will be taken against the identified persons that are legally responsible and accountable for payment of the contributions to the CRF. If contribution payments are not received, the member s risk benefits cover (death, disability, and dread disease benefits) will cease, owing to premiums not being paid to the insurer. In this case, no claims will be payable by the insurance company or the Fund, and the Local Authority may be liable to meet the claim. Method of payment Local Authorities are required to make contribution payments to the Fund via electronic fund transfers (EFT). Member information requirements Member data must be supplied by the Local Authorities each month to the Fund and is due by the 15th of the month, in terms of Regulations 33 and 28 of the Pension Funds Act. This information must be updated regularly as it has an effect on the value of the benefit and on the evaluation of the Fund. The following specific information is required: The correct name of the Fund appears on the monthly schedule: Consolidated Retirement Fund for Local Government or CRF for Local Government Employee number Member surname and initials ID number or Passport number (if applicable) Country of origin Date of birth

27 CRF Client Procedure File 2017/18 Page 27 of 85 Gender (male/female) Marital status Date the member joined the Fund Monthly pensionable salary Member contribution Employer contribution Voluntary member and employer contribution Total contribution Indication of whether the member is a councillor Comment section Members who are pending disability claims, absent, or on unpaid leave It is important to note that contributions and especially insured benefit premiums are payable to the Fund even if the member is not at work. The only time contributions may cease is when a member leaves the Fund or when a member is on unpaid leave for 30 days or more. In this instance, the member is not covered for insured risk benefits, unless the full member and Local Authority contributions or the insured benefit premiums are paid. When there are pending disability claims, the insured benefit premiums must be paid, even though the member may not be at work. Failing to do so may result in the claim not being assessed. There will be no death cover if the member dies and no disability cover if the member becomes disabled and no dread disease benefit should a member be diagnosed with one of the conditions usually covered. Salary Reductions When a member s salary is reduced, the member and Local Authority may elect to continue to contribute at the member s previous (higher) pensionable salary. The Fund must be notified of this. Section 13A of the Pension Funds Act The following is an extract from Section 13A of the Pension Funds Act No. 24 of 1956, as amended. Notwithstanding any provision in the rules of a registered fund to the contrary, the employer of any member of such a fund shall pay the following to the fund in full, namely- i. any contribution which, in terms of the rules of the fund, is to be deducted from the member s remuneration; and ii. iii. any contribution for which the employer is liable in terms of those rules. the minimum information to be furnished to the fund by every employer with regard to payments of contributions made by the employer in terms of subsection (1), shall be as prescribed by regulation. If that information does not accompany the payment information of a contribution, the information shall be transmitted to the fund concerned not later than 15 days after the end

28 CRF Client Procedure File 2017/18 Page 28 of 85 of the month in respect of which the payment was made. Any contribution to a fund in terms of its rules, whether it be a contribution contemplated in subsection (1), a contribution for the payment of which a member of the fund is responsible personally, or a contribution to be paid on behalf of a member- i. shall be transmitted directly to the fund s account with a bank finally registered as such under the Banks Act, 1990 (Act No. 94 of 1990), not later than seven days after the end of the month for which such a contribution is payable; or ii. shall be forwarded directly to the fund in such a manner as to have the fund receive the contribution not later than seven days after the end of that month; or iii. in the case of a fund contemplated in section 15(4) that has been exempted from the provisions of sections 5(2) and 9 because, in operating as a fund, its assets consist exclusively of one or more policies of insurance with an insurer carrying on long-term insurance business as contemplated in the Insurance Act, 1943, shall be forwarded to the insurer concerned in such manner as to have the insurer receive the contribution not later than seven days after the end of that month. Any contribution forwarded to and received by a fund in the circumstances contemplated in paragraph (ii), shall be deposited in the fund s bank account on the first business day following the day of receipt. An amendment of the rules of a fund relating to the reduction of contributions or the suspension or discontinuation of the payment of contributions shall not affect any liability to pay any contribution which became payable at any time before the date of the resolution whereby the amendment was effected, irrespective of the date on which the amendment may take effect. When a person who, for any reason except a reason contemplated in section 14, 28 or 29, has ceased to be a member of a fund (in this subsection called the first fund), is in terms of the rules of another fund admitted as a member of the other fund and allowed to transfer to that other fund any benefit or any right to any benefit to which such person had become entitled in terms of the rules of the first fund, the first fund shall, within 60 days of the date of such person s written request to it, or, if applicable, within any longer period determined by the Registrar on application by the first fund, transfer that benefit or right to the other fund in full. The transfer shall be subject to deductions in terms of section 37D and to the rules of the first fund. For the purpose of monitoring and ensuring compliance with this section, the principal officer of the fund or any authorized person shall, at the times and in the manner and format prescribed by regulation, submit reports to the categories of persons, to be specified in those regulations, who have an interest in such compliance. In applying paragraph (a), authorized person means any person who has been authorized by the relevant board to perform the function contemplated in that paragraph and of whom the registrar has been advised in writing.

29 CRF Client Procedure File 2017/18 Page 29 of 85 Interest at a rate as prescribed by regulation shall be payable from the first day following the expiration of the period in respect of which such amounts were payable on - the amount of any contribution not transmitted into a fund s bank account before the expiration of the period prescribed therefore by subsection (3)(a)(i); the amount of any contribution not received - i. by a fund before the expiration of the period prescribed therefore by subsection (3)(a)(ii); or ii. in the circumstances contemplated in subsection (3)(a)(iii), by the insurer concerned before the expiration of the period prescribed therefore by that subsection; (c) the value of any benefit, or right to any benefit, not transferred by the first fund to the other fund before the expiration of the period prescribed therefore by subsection (5).

30 CRF Client Procedure File 2017/18 Page 30 of 85 PROCEDURE FOR COUNCILLORS Joining the Fund A councillor choosing to join the CRF should refer to the Procedure for a New Employee section on page 24 of this document for the steps to be followed. Contribution Rates All councillor members will contribute a minimum of 15% of their pensionable salary to the Fund. Councillors wishing to contribute at a higher rate can do so, via the Fund s additional voluntary contributions facility. Please ensure that the schedule declaring the monthly contributions is updated, to reflect 7.5% of pensionable salary being allocated to member contributions, and 7.5% towards the employer portion of the contributions. Any contributions received at a higher rate than 15% will need to be declared under the additional voluntary contributions column. Exiting the Fund According to the Rules of the Fund, councillors may terminate their membership with the Fund, due to either of the following events: Their term of office as a councillor comes to an end, for any reason; a change of status from full-time councillor to part-time councillor occurs; contributions cease due to a restructuring of the remuneration package. Please refer to the Procedure on Exit section on page 31 of this document for information on payment options and required claim forms.

31 CRF Client Procedure File 2017/18 Page 31 of 85 PROCEDURES ON EXIT This section sets out the procedure for when a member leaves the CRF and is divided into the following categories: Resignation/Dismissal Retirement Death Disability Dread disease Reorganisation/Redundancy/Retrenchment Deductions from benefits Member transfers are discussed in the Procedure on Transfer section of this manual. Where copies of documents are required, such as a death or marriage certificate, only certification by a Commissioner of Oaths is acceptable. A checklist setting out the certified documentation required with each claim is listed on each claim form for your convenience. Members have an important option decision to make on resignation, reorganisation or transfer. This is called a continuation option on the insured risk benefits that the member previously enjoyed under the Fund. For more information on this option and on which benefits is applicable to, please contact the CRF call centre on 0861CRFUND (273863). Overview on how benefits are payable to members: Direct Payment The Fund will make all benefit payments directly into the member s own bank account by electronic fund transfer (EFT). Payment to third Parties Funds are often faced with situations where members or beneficiaries who become entitled to a benefit from the fund do not have bank accounts or are unable to open a bank account. Section 37A of the Pension Funds Act was amended from 28 February 2014 to allow for payments to a third party where a member/beneficiary is unable to open a bank account. Previously a fund was not allowed to pay a benefit to anybody other than a member or beneficiary. Since the amendment to section 37A has come into effect, funds will now be permitted to pay a member s or beneficiary s benefit into a bank account of a third party, if the member or beneficiary can give sufficient proof that they are unable to open a bank account. The payment will then be regarded as a payment made directly to the member or beneficiary and the fund will have discharged its duties in relation to that member or beneficiary. In light of this change, once it is established that the member or beneficiary is unable to open a bank account, they will be required to sign an indemnity document authorising payment to the third party and indemnifying Momentum and the Fund against any claim resulting from such payment. The most common requests received for payment into third party accounts relate to situations where the member or beneficiary: has a joint account;

32 CRF Client Procedure File 2017/18 Page 32 of 85 is a foreigner working in South Africa; is not in possession of an identity document and hence the banks will not allow them to open an account; has already left the country; is unemployed and does not have money to open a bank account; is going through a divorce; wants payment to be made into a business account; and/or wants payment to be made to their employer. For the sake of clarity, we will deal with each position separately below: 1. Joint accounts The member/beneficiary only has a joint bank account with their spouse. The term joint account is used very loosely. These types of accounts are usually where one spouse is the account holder and the other spouse has signing powers. They both have access to the account and don t need the other spouse s permission when withdrawing funds from the account, making it very easy for the person for whom the money is not intended to have access to it and dispose of it as they wish. For this reason, Momentum will not make payments to joint accounts. 2. Foreigner The member/beneficiary is a foreigner who is employed in South Africa. Often, they do not have the valid identity documents required for opening a bank account or they do not have a valid permit for working in South Africa. For this reason, they are unable to open bank accounts. In such an instance, Momentum will pay to a third party account. 3. No identity document The member/beneficiary doesn t have a valid identity document due to it being lost, stolen, damaged etc. They are therefore unable to open a bank account, as one of the FICA requirements for opening a bank account is a valid identity document. In such an instance, Momentum will pay to a third party account. 4. Member/beneficiary has left the country The member/beneficiary might already have closed their South African bank account and left the country at the time that the benefit is to be paid to them. They often request that the benefit be paid to someone in South Africa to receive the benefit on their behalf. In such an instance, Momentum will pay to a third party account. 5. Unemployed The member/beneficiary is unemployed and as such don t have a bank account as they are not receiving any money on a regular basis. Banks very seldom, if at all, allow for accounts to be opened for once-off payments such as retirement fund benefits, if the value of the benefit is low. In such an instance, provided the benefit is below R20 000, Momentum will pay the benefit into the third party account. 6. Divorce The member/beneficiary had a joint bank account with their spouse but is going through a divorce and has not opened their own bank account yet. If the person is employed, there should be no reason why they won t be able to open an account. If the reasons provided for not being able to open a bank account are one of those mentioned elsewhere in this practice note, then the principles applicable to that situation should be applied. 7. Business account The member/beneficiary asks that the benefit be paid into a business account. This is a request that should be dealt with very strictly. If the person has a business, it is most likely that they have their own personal account. There would then be no reason to pay the benefit into the business account. If the member cannot demonstrate why he is unable

33 CRF Client Procedure File 2017/18 Page 33 of 85 to open an account, we cannot pay to a business account. 8. Employer The member/beneficiary asks that the benefit be paid directly to their employer. Again, if the member has a bank account, there is no reason to even consider this type of request. Momentum will assess each case on its own merits and consider all reasons provided before making a decision to pay the benefit to a third party. Process to be followed for third party payments When payment to the third party is requested, the member/beneficiary will be required to complete the standard Third Party Instruction Form available on the Fund s website and provide us with a copy of the member s identity document or passport and the identity document or passport of the third party, as well as proof of banking details. This form together with the member s withdrawal claim form must be submitted to support@crfund.co.za Hereafter, a response will be provided as to whether the benefit can be paid into a third party account. Overview of Deductions from Benefits Only certain deductions may be made by registered funds from benefit payments. These are set out in Section 37D of the Pension Funds Act and are: Any amount due by the member in accordance with the Income Tax Act Any amount due by a member to his employer in respect of: A guarantee given by the employer for the purpose of a housing loan (In terms of Section 19(5) of the Pension Funds Act). Compensation in respect of damage caused to the employer, by reason of theft, dishonesty, fraud or misconduct by the member and where the employer has suffered loss. In this case, the following is required by the Fund: o o Evidence that the member has in writing admitted liability to the employer Evidence that judgement was obtained against the member in any court, including a magistrate s court. An amount in terms of a valid court order in terms of the Divorce Act may be deducted, (legislation has changed to allow this to be deducted as at the date of divorce). Refer to the legislation section of this manual for an explanation. Maintenance order.

34 CRF Client Procedure File 2017/18 Page 34 of 85 RESIGNATION/DISMISSAL Introduction Introduction Fund claim forms Supporting documents Deductions from benefits Payment options The primary purpose of retirement funding is to provide members with a retirement benefit. It can be regarded as a long-term savings scheme. Consequently, it is important to consider the pros and cons of taking a cash lump sum when leaving an employer s service. If a cash lump sum is taken and not reinvested, the member loses that portion of their retirement savings. It is very difficult to make up this gap at a later stage. The Fund actively encourages members to preserve their retirement savings by reinvesting their monies when they leave service. This can be done within the Fund or in another suitable investment vehicle. The Fund s Rules allow members to defer their benefits in the Fund. Other suitable investment vehicles are discussed in the section on member options on resignation or retrenchment. There are income tax implications on withdrawal, which can be adverse if a cash lump sum is taken instead of preserving the benefit. These are discussed in the taxation section of the file. The Board of Trustees has also identified certain financial advisors to assist in this regard. Please contact our call centre for further assistance. Remember that members who belong to the CRF 2007 Section (members that joined the Fund after 1/1/2007 and 1/8/2006 for ex-contract workers of the City of Cape Town) may not have any additional Local Authority funded retrenchment benefits, depending on their contract of service. What form needs to be completed? Withdrawal/Retirement claim form What supporting documents must be attached? Copy of the member s Identity document Proof/Confirmation of banking details Confirmation of the members income tax reference number If the member is transferring their benefit to another Fund, please supply the contact details and contact persons of the Fund receiving the transfer Claim in terms of Section 37D of the Pension Funds Act Deductions from benefits Permissible deductions are set out in the Procedure on Exit section of this manual.

35 CRF Client Procedure File 2017/18 Page 35 of 85 Payment options on Resignation/Dismissal/Retrenchment This section sets out the various payment options available to members on resignation, dismissal, or retrenchment from the Local Authority s service (employment). These options are: Cash lump sum If a member insists on a cash lump sum, it is essential that the member obtains financial advice, as cashing in his/her pension can have a devastating long-term effect on retirement planning. Deferred pension Members have the option of leaving their benefit in the Fund when they leave service. The money is preserved in the Fund and will accrue with investment income (growth or negative return). This takes pressure off the member of having to make investment decisions with tax implications if a cash lump sum is taken at resignation. A full cash lump sum is available at retirement. Should this option be exercised, the member will be able to retain the favourable tax situation in terms of Formula C of the Second Schedule of the Income Tax Act for service before 1 March Lump sums for that service period will remain tax-free, as well as the additional benefit of the standard private sector tax-free amounts on retirement. Please contact our call centre for further information. Transfer to a provident preservation fund The member may transfer his/her money to a provident preservation fund to provide for retirement. The member would be able to make a one-off withdrawal subject to the rules of the preservation fund, which could be the entire sum before reaching retirement age. The member would be dependent on that preservation fund s investment income and rules. Fees (commission) could apply when transferring to a preservation fund, as agreed by the member with his/her financial advisor. Transfer to a retirement annuity The member would preserve his/her benefits for retirement. The taxable portion can be transferred tax-free. It is important to remember that the member would be restricted to receiving a pension from two-thirds of his/her value. The earliest point from which the pension can be taken is age 55. A full cash commutation is not allowed from a retirement annuity. There is no option of a once-off withdrawal. Again, fees and commission paid on entry to a retirement annuity would be as agreed between the member and his/her financial advisor. Transfer to new employer s fund The member may transfer his/her value in the Fund to his/her new employer s retirement fund once he/she has obtained alternative or new employment. In doing so, the member s benefit is preserved for his/her retirement.

36 CRF Client Procedure File 2017/18 Page 36 of 85 He/she would then be tied to the rules and conditions of their new fund, which might be restrictive if the member were subsequently to resign and leave employment. As explained, the member has various options on resignation, and it would be prudent to investigate which one would be more suitable for the member, both with a view to preserving the retirement benefit and making this decision on the most tax-efficient basis. In 2007, legislation was promulgated to preserve existing tax-free amounts on transfer. The Fund cannot be held responsible for poor investment decisions made by the member. It is essential that the member obtains professional advice when exercising these options. RETIREMENT Introduction Fund claim forms Supporting documents Deductions from benefits Options on Retirement Introduction A person s retirement is a very important life event. The Fund would like to assist in ensuring that the retirement claim is processed as smoothly as possible. It is suggested that the pensioner information section of this manual is also referred to. What form needs to be completed? Withdrawal/Retirement claim form What supporting documents must be attached? Copy of the members Identity document Certified copy of the member s spouse s identity document Proof/confirmation of banking details Evidence of income tax reference number If the member is transferring their benefit to another Fund, please supply contact details and contact persons of the fund receiving the transfer Claim in terms of Section 37 D of the Pension Funds Act Deductions from benefits Permissible deductions are set out in the Procedure on Exit section of this manual. Options on Retirement It is important that members seek financial advice before retirement to ensure that they don t run out of money due to poor decision making. It is essential to obtain professional advice when exercising these options. The Board of Trustees has identified certain advisors to assist with retirement planning. Please call the call centre should members need further advice on the following number: 0861 CRFUND (273863) or contact Efficient Wealth, who are currently the Fund s preferred financial advisors on (021) or and ask to speak to a financial advisor. With effect 1 January 2016 the Board of Trustees decided to close the option to purchase a monthly

37 CRF Client Procedure File 2017/18 Page 37 of 85 pension within the Fund, while investigating new flexible retirement solutions for members going forward. This means that if members retire after 1 January 2016 and wish to receive a monthly pension, they will now have to purchase a pension outside of the Fund. We will notify you and our members as soon as the new products within the Fund become available. This change will not affect any current pensioners in the Fund. DEATH Introduction Fund claim forms Supporting documents Deductions from benefits Disposal of death benefits Payment options Trust/beneficiary funds Section 37C of the Pension Funds Act Introduction The death of a member or a member of his/her family is a traumatic experience. The Fund wishes to assist in ensuring that the death claim is processed as smoothly as possible. There are important legal provisions governing the payment of death benefits. The disposal of death benefits from a pension or provident fund is one of the most difficult and important tasks carried out by fund Trustees. This duty has been placed squarely on their shoulders by Section 37C of the Pension Funds Act. Firstly, the Trustees have to decide who qualifies to receive a benefit. This is where the Fund s Confidential Beneficiary Nomination Form, which has previously been completed by the member, is a valuable guide to the Trustees. Trustees are not obliged to rely solely on the nomination form. In terms of the Pension Funds Act, the Trustees are responsible for investigating the dependants actual financial circumstances and must attempt to establish the existence of any dependants not mentioned on the nomination form. Once the Trustees have conducted their investigation and identified all the dependants, the next step is to decide what proportions (if any) are to be allocated to each individual and, finally, how the benefit is to be paid. Completing the investigation and allocation of the death benefit may in some cases take up to 12 months or longer. What forms need to be completed? The death claim form The disposal of death benefit form Financial needs analysis form To avoid delays in the claim process, please supply us with the following supporting documents: Three certified copies of the member s death certificate (BI-5 or BI-20). Certified copy of the deceased member s identity document. Certified copy of the spouse s identity document. Certified copy of the member s marriage certificate.

38 CRF Client Procedure File 2017/18 Page 38 of 85 Certified copies of the identity documents of any other dependants or nominees. Proof of study at a recognised institution of any dependent children between the ages of 18 and 21. Full medical certificate of any dependent child who is permanently or semi-permanently incapacitated. Copy of the member s latest beneficiary nomination form. Banking details and contact details of dependants/beneficiaries. All documentation must be submitted to the Fund within six months of the date of death. Any late submission of death claims will be declined by the insurance company on contractual grounds, and no insured death benefit will be paid by the Fund or the insurer, but the Local Authority could be held liable for payments. Members must be actively at work on the first working day of the month the member joins the Fund for the insured death benefit cover to commence immediately. Deductions from benefits Permissible deductions are set out in the Procedure on Exit section of this manual. Disposal of death benefits All death benefits paid from a pension, provident or retirement fund are governed by Section 37C of the Pension Funds Act, read together with the definition of dependant in terms of the Act. Death benefits from the Fund do not form part of a member s estate (unless there are no dependants or nominees), and these benefits are not distributed in accordance with the provisions of the member s will. The Trustees of the Fund have a duty to ensure that the death benefits are paid to the deceased member s dependants and nominees (if any) in proportions deemed equitable by the Trustees. Payment options Direct payment of the full benefit to the dependant Payment to a beneficiary fund (payment to a beneficiary fund is ideal where the Trustees need to protect minors benefits or where the spouse or guardian does not have sufficient experience to handle a lump sum benefit) Trust/beneficiary funds In many cases, a direct payment may be appropriate, but there will be instances that require the protection of these benefits, especially when minor children are involved. Trustees have some options available to them when paying out benefits, and the selection of one or a combination of the following options would largely depend on the circumstances pertaining to each case. Section 37C of the Pension Funds Act was amended with effect from 1 November Future payments into a trust fund may be made on the following conditions: The trust fund has been nominated by the deceased member. The trust fund has been nominated by the major dependant/nominee or the person

39 CRF Client Procedure File 2017/18 Page 39 of 85 recognised in law or appointed by the court as the person responsible for managing the affairs or meeting the daily care needs of a major or minor dependant/nominee. The nomination form that accompanied the latest benefit statements made provision for members to nominate a trust fund for the allocation of a death benefit. With effect from 1 January 2009, retirement funds may make payment to a new investment vehicle, namely, a registered beneficiary fund, which will operate in a similar manner to a trust fund, but which is governed by the Pension Funds Act and regulated by the Financial Services Board. The intention of beneficiary funds is to provide boards of trustees with an alternative investment vehicle which complies with strict governance requirements for the protection of the benefits of minor dependants/nominees. What are the benefits of setting up a beneficiary fund or trust? The funds are secure beneficiary funds are registered in terms of the Pension Funds Act. Trust funds are protected in terms of the Trust Property Control Act. Any irregularities must be reported to the Master of the High Court. Flexibility - each beneficiary fund or trust is structured specifically for each beneficiary's unique set of circumstances. Active investment management - investments are structured to provide income or growth, or a combination of both, depending on the circumstances of the case. Investment performance is monitored on a regular basis. Trustees ensure that the minor children derive a direct benefit. Trustees meet both their legal and social responsibilities. Regular communication enables the Trustees to monitor the management of the beneficiary funds or trusts. An annual audit is carried out by an independent firm of chartered accountants, which safeguards the Fund Trustees and beneficiary funds or trust beneficiaries. Regular income can be paid to the guardian of the minor children. The capital sum is available for partial withdrawals if that fund s Board of Trustees approves the need for this. Section 37C of the Pension Funds Act Disposition of pension benefits upon death of member: (1) Notwithstanding anything to the contrary contained in any law or in the rules of a registered fund, any benefit (other than a benefit payable as a pension to the spouse or child of the member in terms of the rules of a registered fund, which must be dealt with in terms of such rules) payable by such a fund upon the death of a member, shall, subject to a pledge in accordance with section 19(5)(6)(i) and subject to the provisions of sections 37A(3) and 37D, not form part of the assets in the estate of such a member, but shall be dealt with in the following manner: (a) If the fund within twelve months of the death of the member becomes aware of or traces a dependant or dependants of the member, the benefit shall be paid to such dependant or, as may be deemed equitable by the Board, to one of such dependants or in proportions to some of or all such dependants [Para. (a) substituted by s. 5 of Act 22/96] (b) If the fund does not become aware of or cannot trace any dependant of the member within twelve months of the death of the member, and the member has

40 CRF Client Procedure File 2017/18 Page 40 of 85 designated in writing to the fund a nominee who is not a dependant of the member, to receive the benefit or such portion of the benefit as is specified by the member in writing to the fund, the benefit or such portion of the benefit shall be paid to such nominee: Provided that where the aggregate amount of the debts in the estate of the member exceeds the aggregate amount of the assets in his estate, so much of the benefit as is equal to the difference between such aggregate amount of debts and such aggregate amount of assets shall be paid into the estate and the balance of such benefit or the balance of such portion of the benefit as specified by the member in writing to the fund shall be paid to the nominee. [Para. (b) substituted by s. 21 of Act 54/89] (ba) If a member has a dependant and the member has also designated in writing to the fund a nominee to receive the benefit or such portion of the benefit as is specified by the member in writing to the fund, the fund shall within twelve months of the death of such member pay the benefit or such portion thereof to such dependant or nominee in such proportions as the board may deem equitable: Provided that this paragraph shall only apply to the designation of a nominee made on or after 30 June 1989: Provided further that, in respect of a designation made on or after the said date, this paragraph shall not prohibit a fund from paying the benefit, either to a dependant or nominee contemplated in this paragraph or, if there is more than one such dependant or nominee, in proportions to any or all of those dependants and nominees. [Para. (ba) inserted by s. 21 of Act 54/89 and substituted by s. 5 of Act 22/96] (c) If the fund does not become aware of or cannot trace any dependant of the member within twelve months of the death of the member and if the member has not designated a nominee or if the member has designated a nominee to receive a portion of the benefit in writing to the fund, the benefit or the remaining part of the benefit after payment to the designated nominee, shall be paid into the estate of the member or, if no inventory in respect of the member has been received by the Master of the Supreme Court in terms of section 9 of the Estates Act, 1965 (Act No. 66 of 1965), into the Guardian s Fund. [Para. (c) substituted by s. 21 of Act 54/89] [Subs. (1) amended by s. 28 of Act 104/93 and s. 27 of Act 11/2007] (2) (a) or the purposes of this section, a payment by a registered fund for the benefit of a dependant or nominee contemplated in this section shall be deemed to be a payment to such dependant or nominee, if payment is made to- (i) a trustee contemplated in the Trust Property Control Act, 1988, nominated by- (aa) the member; (bb) a major dependant or nominee, subject to subparagraph (cc); or (cc) a person recognised in law or appointed by a Court as the person

41 CRF Client Procedure File 2017/18 Page 41 of 85 responsible for managing the affairs or meeting the daily care needs of a minor dependant or nominee, or a major dependant or nominee not able to manage his or her affairs or meet his or her daily care needs; (ii) (iii) a person recognised in law or appointed by a Court as the person responsible for managing the affairs or meeting the daily care needs of a dependant or nominee; or a beneficiary fund. (b) No payments may be made in terms of this section on or after 1 January 2009 to a beneficiary fund which is not registered under this Act. [Subs. (2) added by s. 6 of Act 51/88 and substituted by s. 29 of Act 83/92 and s. 15 of Act 22/2008] (3) Any benefit dealt with in terms of this section, payable to a minor dependant or minor nominee, may be paid in more than one payment in such amounts as the board may from time to time consider appropriate and in the best interests of such dependant or nominee: Provided that interest at a reasonable rate, having regard to the fund return earned by the fund, shall be added to the outstanding balance at such times as the board may determine: Provided further that any balance owing to such a dependant or nominee at the date on which he or she attains majority or dies, whichever occurs first, shall be paid in full. [Subs. (3) added by s.5 of Act 22/96 and substituted by s. 27 of Act 11/2007] (4) (a) Any benefit dealt with in terms of this section, payable to a major dependant or major nominee, may be paid in more than one payment if the dependant or nominee has consented to it in writing: Provided that - (i) (ii) the amount of the payments, intervals of payment, interest to be added and other terms and conditions are disclosed in a written agreement; and the agreement may be cancelled by either party on written notice not exceeding 90 days. (b) If the agreement contemplated in paragraph (a) is cancelled the balance of the benefit shall be paid to the dependant or nominee in full. [Subs. (4) added by s.5 of Act 22/96] (5) The provisions of subsections (3) and (4) do not apply to a beneficiary fund, and any remaining assets held for the benefit of a deceased beneficiary in a beneficiary fund must be paid into the estate of such beneficiary or, if no inventory in respect of the beneficiary has been received by the Master of the High Court in terms of section 9 of the Administration of Estates Act, 1965 (Act No, 66 of 1965), into the Guardian s Fund. [Subs. (5) inserted by s. 15 of Act 22/2008 [S. 37C inserted by s. 24 of Act 101/76 and substituted by s. 13 of Act 80/78 and s. 41 of Act 99/80]

42 CRF Client Procedure File 2017/18 Page 42 of 85 DISABILITY Introduction Fund claim forms Supporting documents Disability claim process Deductions from Benefits Introduction Becoming disabled is a traumatic event for any member of the Fund and his/her family. It can also be traumatic for the Local Authority (employer). Please read this section carefully as the Fund wishes to ensure that the disability claim process proceeds as smoothly as possible. What forms need to be completed? All sections of the Disability claim booklet: Employee statement Employer statement Statement by attending specialist What supporting documents must be attached? Certified copy of the member s identity document Sick leave records of the last 2 years Complete job description Any additional medical information or reports Understanding the Fund s insured disability product The monthly disability benefit (only applicable to Category E) and the lump sum disability benefits (categories A and B) are reinsured with an insurance company, currently Momentum. This has the following advantages: The risk is carried by the insurer, not the Fund. The members are protected, as reinsuring the benefit ensures that there are funds available to pay claims. Members do not pay insured benefit premiums, the employer does. The Fund is protected as the benefit is reinsured. The employer s contribution for the disability benefits is used to insure the benefit; this ensures that several large claims cannot adversely damage the Fund. The employer is protected against an increase in contributions to pay claims. Correct assessment of claims will result in realistic premiums, which will result in more of the employer contribution being available for retirement benefits. The insurance of the disability benefit is aligned to the conditions imposed by the Labour Relations Act. The wording of the policy is standard in the industry and is not more restrictive than any other funds. The Fund believes that insuring this benefit is for the benefit of its members and will add to the security

43 CRF Client Procedure File 2017/18 Page 43 of 85 of the Fund. All claim documents must be submitted to the Fund within 180 days of the date of impairment (not the date that the member s sick leave expires), or the claim will be rejected by the insurance company and no insured benefit will be paid. Certain pre-existing conditions apply to the insured disability benefits. For more information contact the CRF call centre on 0861 CRFUND (273863). It is also important to appreciate that insurance companies are governed by the Association for Savings and Investment South Africa (ASISA) and therefore have a maximum disability benefit payment amount, which includes private disability policy payments. It is in the member s interest to make sure that he/she is not over-insured. Implications Claims are assessed on the medical evidence submitted. The insurer assesses the claim and makes the decision as to whether a claim is admitted. Please note that this decision is not made by the Local Authority (employer), Fund or Trustees. Valid claims will be admitted; claims unfounded by medical evidence will not. Members will not automatically be entitled to a disability benefit from the Fund if they are boarded by the Local Authority (employer). The definition of disability is not restricted to the member s present employer. An impairment causing an alteration in function does not necessarily equal disability from working. The insurance of the disability benefits does not affect the members share in the Fund, only the insured disability benefit What is the difference between permanent and temporary disablement? Permanent disability is exactly that a permanent condition causing the member to not be able to return to the work he/she was doing, or any other occupation he/she could reasonably be expected to do given education and experience. Temporary disability is a condition that the member may recover from and be able to return to work, such as a back operation from which the member takes a particular time to recover. Definition of disability A disabled member may qualify for disability benefits if he/she meets certain criteria. It is vital that the Local Authorities and the members understand that the type of benefit the member may receive depends on the nature of the disability; a member may, therefore, qualify for one type of benefit and not the other, depending on the nature of the claim. A short comparison is as follows: Lump-sum benefit: The member is totally permanently and continuously disabled. Monthly disability benefit: The member is totally temporarily disabled. This shows that the monthly disability benefit can be paid for temporary disability and that the member

44 CRF Client Procedure File 2017/18 Page 44 of 85 may not be eligible for the lump sum benefit. The actual policy wording is as follows: Lump-sum disability benefits (categories A and B): This benefit is payable when, in the opinion of Momentum, the member totally and permanently and continuously cannot use both eyes, or both hands, or both feet, or 1 (one) hand and 1 (one) foot; or the member is totally and permanently and continuously unable, even with further inservice training, to follow: o the regular occupation which he/she practised immediately before; and o the occupations which he/she, given his/her training and experience, may reasonably be expected to follow; and which o is directly and exclusively caused by a bodily injury or an illness to which the member did not negligently or willfully expose himself/herself, except in the interests of the law or to protect his/her or another s life or property; and o is not attributable to intentional self-inflicted injury. Monthly disability benefit (category E): This disability is defined by Momentum as the inability of a member, owing to illness or injury: during the first 2 years of disability, to engage for remuneration or profit in the occupation in which he/she was engaged immediately prior to his/her incapacity; and after that to engage in another occupation for which he/she is or could reasonably be expected to become qualified by virtue of his/her knowledge, training, education, ability and experience. The two-year period mentioned above runs from the commencement of disability, i.e. the start of the waiting period. Deadline for notifying the Fund of a claim All claim documents must be submitted to the Fund within 180 days of the date of impairment (not the date that the member s sick leave expires), or the claim will be rejected by the insurance company and no insured benefit will be paid. Date of Impairment: the date on or after the commencement date from which an eligible member's potential impairment, due to illness or injury, became apparent. The date of impairment is usually the last active day of work; it can however in the case of an accident also be the date of the accident. Definition of the date of impairment Impairment is the inability to perform the key functions of the occupation before adjustments or accommodations are made to the standard terms of the employment contract The date of impairment is the date from which the member s impairment due to illness or injury became apparent

45 CRF Client Procedure File 2017/18 Page 45 of 85 This definition is part of the contract wording since 1 March 2008 to prevent late submissions on disability claims Date of Disability: The date of disability is usually the last active day of work. It could also be the date of the accident. A claim should be submitted when: An employee has been diagnosed with a progressive and chronic medical condition Increased absenteeism due to medical reasons Poor performance due to impairment An employee wishes to submit a disability claim due to ill health or injury The claim waiting period The waiting period starts on the day the member is disabled, i.e. the date of the actual event that caused the disability/impairment and led to the claim. This is typically taken to be the member s last active day at work. The claim waiting period expires six months from this date. Consequences of a delay in submitting the claim forms and documentation Insurance companies go through a particular claim assessment process, which may require more medical evidence, such as a specialist report. If the original claim is submitted at the end of the waiting period, and further reports are required, the assessment, decision, and payment could take place some considerable time after the end of the waiting period, which could be prejudicial to the member and employer. If the claim is not submitted within the required timeframe, the claim will be rejected by the insurance company and no insured benefit will be paid. Neither the Fund nor the insurer will be able to meet the claim. The member could have recourse to the Local Authority for payment of the claim. Cost/payment of the medical evidence details regarding the responsibility of the various parties The cost of providing the medical evidence, such as a medical or specialist report is the responsibility of the member. The onus is on the member to prove disability, through medical evidence submitted. Where a member has no financial means with which to obtain the required specialist medical reports in support of his/her application for disability, an application for financial assistance can be submitted. The merits of each application will be considered by the trustees of the Fund. Should the trustees be in agreement with the validity of the application, they will forward the application together with their own motivation, to the insurer for final consideration. Please note that financial assistance is only granted for the completion of the required medical report, not for medical expenses incurred for diagnostic purposes. The Fund cannot pay for medical reports. If the insurance company requests any additional evidence, at a later stage, the cost will be borne by the insurance company.

46 CRF Client Procedure File 2017/18 Page 46 of 85 Technical issues maximum benefits, benefits from other funds/private policies Members should make sure that they are not over-insured or under-insured. The terms and conditions of the insured disability policy (standard for lump sum disability benefits) effects a reduction over the last years before retirement age, i.e. from age 55 to 65 there is a reduction in the lump sum disability benefit of 1/120th per month. This means that the lump sum disability benefit reduces, the closer a member gets to retirement age. The Local Authority s (employer) responsibility regarding a disabled member in terms of the Labour Relations Act, the Employment Equity Act, and other relevant legislation The Promotion of Equality and Prevention of Unfair Discrimination Act (Act number 4 of 2000) will affect disability in the workplace. This legislation has an enormous impact on disabled employees, the code of good practice, which currently applies, as well as on the Local Authority (employer) who will be forced to comply with this Act and the terms and conditions of the Labour Relations Act. According to the Labour Relations Act (Chapter VIII, Section 6.2), the employer s obligation is as follows: A person determining whether a dismissal arising from ill-health or injury was unfair must consider: whether or not the employee is able to perform the work; and if the employee is not capable: o the extent to which the employee is not able to do the work; o the extent to which the employee s work circumstances might be adapted to accommodate a disability, or, where the employee s duties might be adapted; and o the availability of suitable alternative work. Thus, the Local Authorities have a responsibility towards a disabled employee. The Employment Equity Act requires employers to employ disabled people. The Fund is unable to become involved with the employer s industrial relations (IR) issues; it is the employer s responsibility to comply with this legislation. The Fund will assist the employers with disability products, which provide meaningful benefits and which are aligned to legislation. A member who does not qualify for the insured disability benefit (Categories C, D, F or G members, or members in Categories A, B, and E whose claim is repudiated by the insurer) and who are boarded by the Local Authority in terms of the Labour Relations Act 1995, may receive their member share as an ill-health retirement benefit. Continued payment of contributions by the Local Authority and member while a claim is being assessed Premiums must be paid for members until the disability claim is admitted by the insurance company. If premiums are stopped when the member stops working, the claim will be assessed, and no death cover will be paid if the member dies before the end of the waiting period. Continued payment of premiums when the claim has been declined by the insurance company and the member has requested reassessment Premiums must be paid for members until the disability claim is admitted by the insurance company.

47 CRF Client Procedure File 2017/18 Page 47 of 85 If premiums are stopped when the member stops working, the claim will be assessed, and no death cover will be paid if the member dies before the end of the waiting period. Appealing the decision of a declined claim The Local Authority or the member may appeal with the Insurance Ombudsman against the decision of the insurance company to decline a claim. This must be done within three months of the claim being declined; otherwise, the insurance company will treat the appeal as a new claim. Deductions from benefits Permissible deductions are set out in the Procedure on Exit section of this manual. Frequently asked questions The employer admits that the claimant cannot perform his own occupation. There is no other work for him at the employer and what are the chances of finding an occupation somewhere else? The insurer assesses the ability to work It is reasonable to expect that the insurer gives examples of alternative occupation. It is reasonable to expect that the insurer justifies their decision The insurer does not insure the availability of positions, and the contract is not limited to positions at the member s own company only Who gives the insurer the right to decline a claim if the doctors clearly indicated that the claimant is disabled and that he cannot work? This is an occupational disability benefit and not a medical benefit The ombudsman clearly defines the role of the medical service provider and the claims assessor appointed by the Insurance company Momentum s (the current insurer) criteria could differ from the doctors The medical service provider provides objective information on the impairment FUNERAL BENEFIT CLAIM Introduction Claim forms Supporting documents How to claim for the repatriation benefit Introduction All members in the CRF have funeral cover up to the age of 75. This benefit covers the member, their spouse, and children for the following amounts:

48 CRF Client Procedure File 2017/18 Page 48 of 85 Member: R Spouse: R Child (18-26*yrs): R Child (11-18yrs): R Child (1-11yrs): R Child (0-1**yrs): R *provided that the child is unmarried if under the age of 21, or is unmarried and a full-time student if under the age of 26. **Stillborn children are also covered, provided that the pregnancy term is between 26 weeks and full gestation. In the unfortunate event of the death of the member or the member s spouse or an eligible child, the payment is usually made within two working days of receiving the certified documentation. The insurer requires that notice of the claim needs to be given within six months of the date of death, or the insurer will repudiate the claim on contractual grounds, and no benefit will be paid by the Fund or the Insurer. The Local Authority may be liable for payment of the benefit. What form needs to be completed? Funeral Claim form (Note that if the new ID card is being submitted; please supply a certified copy of the front and back of the card to avoid unnecessary delays) What supporting documents must be attached in the case of death of a: Principal Member o Certified copy of the death certificate o Certified copy of the notification/register of death/stillbirth (DHA/1663 A) form o Certified copy of the deceased member s ID o Certified copy of the beneficiary s ID o Proof/confirmation of the beneficiary s banking details o If the member was single and had no major children at date of death, then the funeral claim will be paid to a nominated family member Qualifying spouse o Certified copy of the death certificate o Certified copy of the notification/register of death/stillbirth (DHA/1663 A) form o Certified copy of the marriage certificate o If a common law/customary marriage an affidavit is required. The affidavit must state the length of the relationship between the deceased and commonlaw/customary spouse o A certified copy of the identity document of both the member and the deceased spouse o Confirmation of the banking details of the person responsible for the funeral Qualifying Child o Certified copy of the death certificate o Certified copy of the notification/register of death/stillbirth (DHA 1663) form available from Home Affairs

49 CRF Client Procedure File 2017/18 Page 49 of 85 o o o o o o o o In the event of a stillborn child, we will require a letter from doctor/specialist confirming duration of pregnancy Certified copy of the member s Identity document Certified copy of the qualifying child s birth certificate or identity document If the qualifying child s surname differs from the member s we will require An affidavit stating that the deceased child was the insured s or the spouse s child. If a qualifying child is unmarried and over the age of 21 years, but under the age of 26 years, proof of full-time attendance at an approved educational institution In the case of a qualifying child over the age of 21-years who is incapacitated by a physical or mental infirmity from maintaining himself or herself, a medical certificate confirming the details will be required Confirmation of the banking details of the person responsible for the funeral Your checklist to save you time Please ensure that the fingerprints on the notification/register of death/stillbirth (DHA 1663) form are clear All active members under the age of 75 have funeral cover Remember that members who are accepted as disability claimants keep their funeral cover until they reach the age of 65 Dependants of members who die before the age of 65, will remain covered until the member would have reached the age of 65 How to claim for the repatriation benefit Contact the Insurer (Sanlam) on Confirm you are claiming for a group scheme benefit: Consolidated Retirement Fund - Group Code A Sanlam Consultant will assist you with further arrangements DREAD DISEASE BENEFIT Introduction Fund Claim forms Supporting documentation Claim Procedure Introduction The dread disease cover is a financial aid benefit available to members of the CRF, who have elected category A, B, C or E. This benefit enables members to pay for the unforeseen expenses they might be faced with if diagnosed with an insured dread disease. What forms need to be completed? Dread disease application form, complete with separate statements drafted by: Employee

50 CRF Client Procedure File 2017/18 Page 50 of 85 Employer Medical examiner What supporting documents must be attached? Insured Dread Disease Supporting Documents All specialist reports and investigations done by the Blindness ophthalmologist including a visual acuity reading Histology reports Gleason Scores Cancer Copies of special investigations e.g. mammogram, MRI and CT scans Clinical TNM classification All specialist reports Coronary Artery Surgery Operations reports ECG tracings Heart Attack Cardiac Enzyme test results Clinical notes Full operational report Major Organ Transplants Application to be put on transplant list All specialist report Paralysis All specialist reports Pathology Reports Renal Failure Specialist and clinical reports All specialist reports Stroke Daily living activity report Claim Procedure Should a member need to claim for this benefit, the completed claim form must be submitted to the Fund within 3 months of the date of occurrence and the specialist reports and supporting test results must be submitted to the Fund within 6 months of the date of occurrence. The date of occurrence is the date that the event or condition has been diagnosed or for the first time manifested itself. The dread disease claim may be declined by the insurer if a member has claimed within 24 months following the commencement date of the dread disease benefit for an event or condition that relates to a condition that he/she was being treated for, or which he/she either knew about, or could reasonably have been expected to know about or sought medical advice in the 12 months prior to the commencement date of the dread disease benefit. If the 24 months following the commencement date of the dread disease benefit has expired, the insurer cannot apply the above restriction clause and therefore cannot decline the claim due to any pre-existing conditions. Herewith a short summary table that you could keep on hand as a quick reference when you are unsure

51 CRF Client Procedure File 2017/18 Page 51 of 85 whether a pre-existing condition could have an effect on the member s dread disease claim: Columns below are with respect to the commencement date of the Dread Disease cover Start ---- one year two years During 12 months prior Aware of the condition or receiving treatment Not aware of the condition Claim submitted during 24 months following Claim can be declined on grounds of pre-existing condition Can submit claim to insurer for assessment Claim submitted after 24 months Condition is not preexisting It is also important to be aware that members are only able to claim for a maximum of two unrelated illnesses. The payment of the dread disease benefit is subject to policy conditions and the level of the disease as defined in the policy. Herewith a summary of what is included: Insured Dread Disease Blindness Cancer This includes The total and permanent loss of sight in both eyes with sharpness of vision of 3/60 or worse in the better eye when measured with the use of visual aids A malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of malignant cells and invasion of tissue This includes leukaemia, lymphoma, and sarcoma This excludes Any cancer in situ or pre-malignant condition. Any tumour of the prostate unless histologically classified as having a Gleason Score greater than 6 or having progressed to at least clinical TNM classification T2NOMO Any skin cancer, other than malignant melanoma that has been histologically classified as having caused invasion beyond epidermis

52 CRF Client Procedure File 2017/18 Page 52 of 85 (outer layer of skin) Coronary Artery Surgery Heart Attack Major Organ Transplant Paralysis Renal Failure Stroke The undergoing of surgery to correct the narrowing of, or blockage to, 2 or more coronary arteries using a by-pass graft The death of heart muscle due to inadequate blood supply 2 of the following criteria will need to be proven: a) Compatible clinical symptoms b) Characteristic ECG changes c) Raised cardiac markers (as defined in policy) The actual undergoing of a transplant Confirmation that the eligible member has been placed on an official transplant list at a registered transplant facility within the borders of the Republic of South Africa The total and irreversible loss of use of 2 or more limbs as a result of injury or illness to the spine The end stage renal failure requiring dialysis i.e., irreversible functional failure of both kidneys The death of brain tissue due to inadequate blood supply or haemorrhage within the skull, confirmed by neuroimaging investigation and appropriate clinical findings by a specialist neurologist The condition will be assessed by a full neurological examination by a specialist neurologist no earlier than 3 months from date of occurrence It shall also include permanent impairment as measured by: a) The inability to perform 3 or more advanced activities of daily living or b) A whole person impairment rating 11% to 20% Prophylactic mastectomy for carcinoma in situ Keyhole surgery Acute renal failure or renal transplant Does not include transient ischaemic attacks, vascular disease affecting the eye or optic nerve, migraine and vestibular disorders or traumatic injury to brain tissue or blood vessels REORGANISATION / REDUNDANCY / RETRENCHMENT Introduction Fund claim forms Supporting documentation Deductions from benefits Fund benefits and employer liability Introduction Being retrenched or made redundant is a traumatic experience for members of the Fund and their families. It can also be traumatic for the Local Authority. The purpose of this section is to explain the Fund s position and the benefits payable. Please read this material carefully, as the Fund wishes to

53 CRF Client Procedure File 2017/18 Page 53 of 85 ensure that the reorganisation/retrenchment/redundancy claim process proceeds as smoothly as possible. It is important to understand that retrenchment/redundancy is NOT a Fund issue it is an employer (Local Authority) issue. The Fund does not determine a member s retrenchment benefit. This is set out in the Local Authority s policies and structures and in the employees terms and conditions of employment. Retrenchment benefits may consist of a Fund benefit and an employer liability. The Rules of the Fund make provision for the employer liability. This is very unusual and was put in place by the Local Authorities for tax-efficiency and planning purposes. The new Fund Rules effective 1 January 2007 for new members, do not make provision for any Local Authority liability on retrenchment unless expressly provided for in the member s contracts of service. The Fund does not drive the issue or process members of the Fund receive their benefit from the Fund when they leave the service of their employer. This could be by voluntary resignation, retirement, death or disability or, in this instance if they were retrenched or made redundant. For ease of reference going forward, we refer to retrenched members, whereas this also collectively includes members affected by reorganisation and those made redundant. The Fund cannot pay a greater benefit than the member s value in the Fund (the member s share) because the member is being retrenched. This would prejudice the remaining members in the Fund and would discriminate against them. What form needs to be completed? Withdrawal/Retirement Claim Form What supporting documents must be attached? A copy of the minutes of the Local Authority Board meeting pertaining to the decision to retrench the member Proof of payment to the Fund with regards to the Employer liability Deductions from benefits Permissible deductions are set out in the Procedure on Exit section of this manual. Fund benefits and employer liability The current retrenchment benefits are: a) A cash lump sum equal to the member s share of the Fund plus b) * the lesser of: the difference between the age of 65 years and his age on his nearest birthday, x 8% of member s share; or

54 CRF Client Procedure File 2017/18 Page 54 of 85 member s share. * is paid by the Local Authority to the Fund, which pays it to the member. Keep in mind that the new Fund Rules effective 1 January 2007 for a new employee, do not make provision for any Local Authority liability for retrenchment, unless expressly provided for in the member s contract of service. Implications If the employer s retrenchment policy and benefits change in the bargaining council, it may mean a change to the Fund s Rules. The maximum benefit that can be paid by the Fund to a retrenched member is the value accumulated by the member in his member share up to the date of exit. The top-up benefit that is paid by the Local Authority can only be paid to the member when the Local Authority pays this amount to the Fund. Should the Local Authority not pay this amount to the Fund, the Fund will not be liable to pay this additional amount. The Fund is prevented by the Pension Funds Act to pay additional benefits that have not been funded. PROCEDURE ON TRANSFER Introduction Transfer forms Supporting documents Introduction Members may transfer to or from the CRF in various ways: a) Transfers to the CRF: i. if they leave the service of their previous employment and transfer their benefit to the Fund when they join a participating Local Authority; or ii. if they transfer in terms of Freedom of Association, when it is implemented. b) Transfers from the CRF: i. if they leave the employment of a Local Authority and transfer their benefit to their new employer s fund, or they preserve their benefit; or ii. if they transfer in terms of Freedom of Association, when it is implemented. c) Internal Transfers: If a member resigns from employment at a participating Local Authority and takes up a position with another participating Local Authority. d) Transfers in terms of Section 197 of the Labour Relations Act: Some employees or groups of employees may be transferred to another employer in

55 CRF Client Procedure File 2017/18 Page 55 of 85 terms of Section 197 of the Labour Relations Act. This is where a member remains in service and does not leave actual employment. A member cannot simply decide to transfer to another fund while he/she remains in service; he/she also cannot stop contributing to the Fund. This is in terms of the Pension Funds Act and the Income Tax Act. A new member who transfers in terms of a) i) above is a new employee and his/her benefit is transferred in terms of a Recognition of Transfer between Approved Funds Form, which is handled between the two funds involved and sent to the South African Revenue Service. This transfer is effected tax-free, if the transfer is from: a pension fund to another pension fund; a provident fund to a pension fund; or a provident fund to another provident fund. Transfers from a pension fund to a provident fund are fully taxed When a member transfers in terms of b) i) above (resigns from employment), the transfer to the new fund is effected tax-free, if the transfer is from: a pension fund to another pension fund; a provident fund to a pension fund; a provident fund to another provident fund; a pension or provident fund to a retirement annuity; a pension fund to a pension preservation fund; or a provident fund to a provident preservation fund. For any other transfers while a member remains in service, i.e. the Freedom of Association Transfers, the procedure and documentation in terms of Section 14 of the Pension Funds Act apply. This also applies to members whose employment is transferred in terms of Section 197 of the Labour Relations Act. There is not necessarily a cash option available on transfer. This may not apply to certain transfers in terms of Section 197 of the Labour Relations Act and depends on the terms of the transfer. It is recommended that the Local Authority always contact the Fund before a transfer is effected in order to obtain clarity on the issue. Required forms and supporting documents for transfers When a member resigns from employment and wishes to transfer his/her benefit to another fund, the following documents are required: the correct exit claim form; the Recognition of Transfer between Approved Funds Form (completed by the administrators and not the Local Authority); a copy of the policy proposal and policy number if the transfer is to a retirement annuity or preservation fund; and

56 CRF Client Procedure File 2017/18 Page 56 of 85 contact details at the new fund. If a member resigns from employment at a participating Local Authority and takes up a position with another participating Local Authority the following documents will be required: completed claim form obtained from Local Authority (from which member is resigning from) indicating member's choice to transfer benefit from one participating Local Authority to another; completed New Member Application Form by the new Local Authority. If a member transfers in terms of Freedom of Association, the following documents are required: The exit claim form, and The original member option form, stating his/her choice of fund. Only option forms that have been signed by the member and received by the Fund within the agreed option period will be accepted by the Fund. Housing Loans on Transfer If a member has a housing loan in terms of the Funds collateral housing loan agreement with First National Bank (refer to the FNB Smart Housing Plan on page 58 of this manual), the loan may be settled on transfer, to another fund. This may have adverse and severe income tax implications for the member. If the home loan cannot be transferred to the new Fund, the Fund will apply for tax clearance on the housing loan amount, plus the tax liability on that amount. This means that the member loses his/her vested tax-free lump sum in terms of Formula C of the Second Schedule of the Income Tax Act on the redeemed amount plus tax. When the tax-clearance is received, the Fund will settle the housing loan, pay the tax and then transfer the balance of the member s benefit to the new fund. When transfers are effected in terms of an agreement between the employer and the various funds, such as in Freedom of Association, the new funds generally agree to take over the housing loans, to avoid prejudicing the members. This is subject to the provisions of the National Credit Act. This means that the situation of redeeming the loan, with consequent adverse tax implications, is avoided. Section 14 of the Pension Funds Act: implications on transfer to another fund If a member transfers from the Fund to another fund, in terms of an agreement entered into between the employer and the funds, the member cannot simply be transferred over to the new fund and his/her assets transferred. There is a set of documents that needs to be completed by both the transferor and transferee funds, and this has to go to the Registrar of Pension Funds at the Financial Services Board (FSB) for approval. This is in terms of Section 14 of the Pension Funds Act. Where both funds are valuation exempt, a revised and streamlined Section 14 procedure applies. The documentation is prepared by the actuaries of the funds involved and not by the Local Authority. The purpose of the documentation is to protect the employees from being forcibly transferred from one fund to another and to ensure that adequate communication has been effected regarding the transfer. All the documentation given to the members explaining the difference in the funds and the copy of the option form must be sent with the documentation, which must be signed by the Principal Officer and at least one Trustee of both the transferor and the transferee funds. It is for these reasons that it is imperative that the Funds are involved in the transfer process from the

57 CRF Client Procedure File 2017/18 Page 57 of 85 beginning in order for unnecessary delays to be avoided. The documentation also certifies that the members values as calculated are correct and that the transferring members, the members remaining in the fund and the members in the new fund will not be prejudiced by the transfer. In effect, the members will transfer immediately to the new fund, but the assets will only be transferred once the Section 14 documentation has been approved by the FSB. Therefore, the documentation should state what agreed rate of interest the assets would earn between the effective date and actual date of transfer. It is important to understand that transfers can only be processed in terms of this procedure. The Funds must adhere to the conditions of the Pension Funds Act and the Income Tax Act otherwise, they will lose their registration and tax approval with the authorities.

58 CRF Client Procedure File 2017/18 Page 58 of 85 OTHER FUND BENEFITS FNB Smart Housing Plan The Fund recognises that the provision of adequate housing is a pressing issue in South Africa. Section 19(5) of the Pension Funds Act allows funds to provide housing loans to their members. These loans are specifically for housing purposes. The Financial Services Board has stated that it is aware that loans are sometimes being used for other purposes; that is, fraudulently. It could stop this facility for all funds if this practice continues. Background There are two ways that a fund may offer housing loans: either via a Surety Agreement or as a Direct Loan. The CRF has determined that in the interest of all members, that only the Surety Agreement option is offered. More information on the pros and cons of the two options are explained at the end of this section. The Fund has established a Surety Agreement with First National Bank (FNB), a member of the FirstRand group. The Fund provides a guarantee to FNB for a Surety Amount based on the member s resignation benefit. FNB then provides the housing loan to the member. Interest Rates The interest rate at which loans are repayable depends on the size of the loan as follows: Loan Amount Interest Rate up to R Prime Interest Rate minus 1% Between R but less than R Prime Interest Rate minus 1.25% over R Prime Interest Rate minus 1.5% The repayment interest rate is not fixed for the term of the loan, but changes when the Prime Interest Rate changes. Therefore, monthly repayments will increase or decrease if the Prime Interest Rate fluctuates Applying for an FNB Smart Housing Plan loan Qualifying criteria The member s Surety Amount for the housing loan is calculated as 60% of member share or withdrawal benefit, after deduction of any previous outstanding loans or Divorce Orders in place at the date of home loan application. There is a minimum loan amount of R5000. The maximum repayment period is 20 years, or up to the member s normal retirement date if that is sooner. Loan repayments are directly deducted, in monthly instalments, from the member s salary and not in the form of a debit or stop order. Members must be able to afford the loan repayments. It is the Local Authority s responsibility to verify this. A member CAN NOT apply for a Home Loan if: under ADMINISTRATION, formal DEBT REVIEW, or having been declared INSOLVENT the quote for work/purchase EXCEEDS SURETY amount, unless providing evidence of where the difference (inclusive of transfer fees, if applicable) is coming from, e.g. a savings account) it is to purchase a SUBSEQUENT (second) property

59 CRF Client Procedure File 2017/18 Page 59 of 85 FNB shall ensure that when the loan is granted, that the monthly instalment shall meet all the necessary statutory and regulatory compliance, including but not limited to specific compliance with the provisions of the National Credit Act (NCA) 34 of FNB shall ensure that the monthly instalments are in line with FNB s policy requirements as determined from time to time. The housing loan benefit is subject to any further provisions as agreed to mutually from time to time between FNB and the Fund. A Local Authority must have an agreement with FNB before housing loans can be arranged for Fund members of that Local Authority. Smart Housing Plan Loan - Application procedure A Smart Housing Plan - Loan Application Form must be completed, and accompanied by supporting documentation. FNB will consider the application and run a credit check, before issuing an FNB contract, which the member must review, sign, and return via their HR representative. Steps to follow: A member should phone the CRF call centre 0861 CRFUND (273863) to determine their Surety Amount (Have RSA ID and Employee numbers available). With the same call, if an employee of the City of Cape Town, the member can make an appointment with the Home Loan Consultant, who will assist with completion of the Smart Home Loan application form. Smart Home Loan application forms should never be supplied to the member for self-application. Punctuality for the appointment, which takes up to 45 minutes, is important. If for any reason, the member is unable to make their appointment, they should notify the CRF call centre in a timely manner. Certain documents need to be brought along as indicated in the Checklist attached on the website ( taking note that: In terms of the National Credit Act, non-fnb applicants are required to submit bank statements for the last three months. As per FICA requirements, the proof of address must be certified as a true copy of the original document. Members should understand that: A housing loan is a legal contract. Members cannot stop making repayments. The loan must be for housing purposes. The repayment amount changes when the interest rate changes. Given that the loan repayment is for a fixed period, this means that the member may be adversely affected financially if interest rates increase. FNB will make enquiries with the National Loan Register to test affordability. FNB sends a monthly schedule to the Local Authority, which shows monthly repayments and new loans. The Local Authority must ensure that this list is forwarded to the salaries department to make sure that new loans are deducted from the member s salary. The Fund is not involved with the repayment of loans. If a member leaves the service of the Local Authority, the outstanding loan must be clearly indicated on the Fund exit document. The National Credit Act applies to all home loan applications since 1 July The loan for purchase cannot be combined with one to renovate.

60 CRF Client Procedure File 2017/18 Page 60 of 85 What supporting documents must be attached? Specific to the purpose of the loan (whether buying or renovating), additional documents are required, detailed in the subsequent tables below. For All Cases: For all loan types, the following core set of documents are required: Document Certified copy of member s RSA ID If married, copy of the spouse s RSA ID Copy of the member s payslip. If married in CoP we will require of the spouse s payslip If married, copy of the marriage certificate or marital contract Certified copy of Proof of residential address Bank Statements of member and spouse if married in CoP (not applicable for FNB Clients) If divorced, copy of the divorce decree Requirements Must be certified by a Commissioner of Oaths The certification needs to be dated and cannot be older than 1 month Must be certified by a Commissioner of Oaths The certification needs to be dated and cannot be older than 1 month Latest available copy Must be certified by a Commissioner of Oaths Any account addressed to the member by name, not older than 2 months Please note that this excludes doctor s accounts and correspondence from any division affiliated with First National Bank/FirstRand Group e.g. WesBank 3 months bank statements, showing latest three salaries Must be certified by commissioner of Oaths After that, specific to the purpose of the loan, the following extra documents are also required: Purchasing: Essentially, the member must be able to prove that he/she has an accepted offer to purchase in place. The overall funding must be demonstrated, i.e. including bond approval, and if also selling a property, the accepted offer of sale. Document Requirements Offer to purchase accepted and fully signed Bond approval from a quotation with all relevant breakdown of capital, instalments, bank etc.

61 CRF Client Procedure File 2017/18 Page 61 of 85 If transfer fees are required Invoice from the attorney Building or Renovating: Essentially, the member must be able to prove that he/she owns the property for which the loan applies. Document Proof of ownership of the property: Quotation(s) for the building work: If building in Eastern Cape Requirements payslip indicating a bond deduction OR - a Title Deed must not be less than the loan amount being applied for if more than the surety, then evidence is required of where the balance of the money is to come from i.e. a savings account statement with the members name on it from a recognised builder dated and not older than 1 month A letter from the Chief, on letterhead paper or with stamp With the completion of the loan application forms, the Local Authority must ensure that the rules of the FNB loan scheme have been applied and explained to the member. All forms must be explained to the member before he/she signs them. Defaulting on the repayment of a housing loan Defaulting on the repayment of a housing loan has serious consequences. If there is no other alternative but to utilise his/her benefit in the Fund to repay the loan, without the member leaving employment (service) for example when the member is placed under administration, this is permissible in terms of current legislation. It does, however, have drastic consequences for the member. The process works as follows: The Fund will apply to the South African Revenue Services (SARS) for tax clearance on the amount of the housing loan plus the amount of the tax liability created. When the tax directive is received by the Fund, the housing loan will be repaid to FNB, and the tax liability will be paid to SARS. The member s records in the Fund will be changed to show the reduced benefit and pensionable service in the Fund. The member will have received a benefit from the Fund and will lose the lump sum tax advantages of Formula C of the Second Schedule of the Income Tax Act on the amount of the loan, plus the tax. It should be apparent that defaulting is disastrous for any member with Formula C tax advantages. Subsequent home loans are available to members. To apply for an additional loan the member must not be: In arrears on their current home loan Under an Administration Order, Formal Debt Review, or declared insolvent If members wish to apply for an additional home loan, the procedure is identical, noting that all

62 CRF Client Procedure File 2017/18 Page 62 of 85 documentation must be presented afresh. Pros and Cons of Surety Agreement vs. Direct Loan Surety Agreement: A fund sets up a formal agreement with a financial institution whereby the fund provides a guarantee to the financial institution for a surety amount based on the member s resignation benefit. The financial institution provides the housing loan to the member, while their retirement capital remains in the fund untouched. Hence, the housing loan is arranged between the financial institution and the member. Direct Loan: The member s actual retirement capital is uplifted out of the fund to create the principal loan debt. There are several key disadvantages to this: 1) When the member repays the housing loan, they are paying back their own retirement capital. This could drastically affect the member s retirement benefit if interest rates differ from those that the fund actually earns on its investments. (2)The cost of administering this type of loan facility is expensive and cannot be spread throughout the whole fund membership, as this would be unfair to members who do not have loans. (3)There is an adverse effect on the fund investment strategy when uplifting monies for loans. The CRF believes that the Surety Agreement is overwhelmingly the best arrangement, based on the points outlined above. Given the significant disadvantages associated, the CRF does not cater for the Direct Loan option.

63 CRF Client Procedure File 2017/18 Page 63 of 85 Family Assistance Benefit This is a free support service available to members of the CRF and their immediate family including spouse, children, parents and parents-in-law. To claim for the family assistance benefit, call , confirm scheme and membership details: I.e. CRF and give the member pension number. On bereavement, this benefit offers the following: Funeral assistance service Provides support during a traumatic and difficult time by assisting with certain aspects of the funeral arrangements, which allows the family to deal with their grief and not worry about funeral details. Bereavement counselling The insurer provides telephonic bereavement counselling and refers the bereaved family for faceto-face counselling services for support and advice. Transportation of the deceased family member This service assists with the arrangement of documentation for transportation of the deceased family member s mortal remains to the funeral home nearest to his/her regular place of residence within the borders of South Africa. Legal advice on any matter (limited to a free 30-minute consultation) Legal assistance is a 24-hour helpline and attorney-referral service. The Line is manned by experienced attorneys who are able to provide guidance and information on all legal matters. Criminal offences, fines, debt, contracts, divorce, and maintenance, are just some of the issues on which advice is given. A range of legal documentation Over and above the legal assistance helpline, a number of relevant standard legal documents can also be provided, namely: Small Claims Court kit Child maintenance kit Domestic employment agreement Lease agreement Purchase agreement Will and testament In the event of trauma, this benefit can be used to assist with the following: o trauma, assault, HIV protection o emergency medical services

64 CRF Client Procedure File 2017/18 Page 64 of 85 VALUE ADDED BENEFITS (VABs) Extended Funeral Cover for your Family Members of the CRF already have a funeral benefit, which covers the member, their spouse and qualifying children. The new VAB extended funeral cover, allows members to increase their existing cover to R or insure 2 parents, 2 parents-in-law and 9 other family members to the value of R 5 000, R or R through Metropolitan. The monthly premium will be deducted by debit order, and the amount depends on the level of cover the member elects as per the table below: Funeral Plan Age Cover and Premium R R R The amount of Immediate Family (Extension of current benefit) cover will be proportionate for children under the age of 6 R 18 R 36 R 54 Parents Up to the age of 75 R 32 R 64 R 97 Extended Family Up to the age of 75 R 35 R 70 R 105 Member cover levels Younger than six years How to apply for the Extended Funeral Cover Members will be required to complete the extended funeral cover application form and submit it to Metropolitan at: CRF@Metropolitan.co.za (and cc support@crfund.co.za) Post: PO Box 2212, Bellville, 7530 When will the cover start? The member is covered by the benefit from the first day of the month in which the insurer receives the first premium. It is, however, important to note that a 6-month waiting period applies before family members are insured for death by natural causes. They will be insured for accidental death immediately.

65 CRF Client Procedure File 2017/18 Page 65 of 85 How to claim on the Extended Funeral Cover? Contact the insurer, Metropolitan, directly on or Send an to The insurer will confirm what documentation is required, and payment will be made on receipt of the documentation. Important criteria to remember The member and the insured family must live in South Africa Should the member wish to cancel the policy, they must do so in writing. If a monthly payment is missed, the policy will lapse For more detailed information on this benefit, please visit our website or contact our call centre on 0861 CRFUND (273863).

66 CRF Client Procedure File 2017/18 Page 66 of 85 FNB Housing Loan for incomes of R3 500 R per month The Fund recognises that the provision of adequate housing is a pressing issue in South Africa. Section 19(5) of the Pension Funds Act allows funds to provide housing loans to their members. These loans are specifically for housing purposes. The Financial Services Board has stated that it is aware that loans are sometimes being used for other purposes; that is, fraudulently. It could stop this facility for all funds if this practice continues. The CRF is constantly looking for ways to improve our benefits offered to members, and the new additional FNB housing loan option is another way we can assist members with becoming a homeowner. Who qualifies for this benefit? Members of the CRF earning between R3 500 and R per month, provided that they are permanently employed and have been working for more than 6 months. The purchase price of the house the member wishes to purchase, extension or renovations to existing property is less than R The member is not under administration. How can this benefit help first-time homebuyers? The member does not need a surety amount from the Fund in order to apply. FNB will provide a bond for up to 105% of the purchase price of the house to qualifying members. A once-off Finance Linked Individual Subsidy (FLISP) (a government subsidy) is available for first-time homeowners who earn between R3 301 and R The FLISP subsidy amount ranges from R to R Members could qualify for a 30% discount on FNB attorney fees. Members will have access to affordable life and property insurance. Members have the option to pay a fixed interest rate or a variable interest rate on the loan. How does a member apply for the loan? Download the cover letter and application form from the CRF website. This form can be submitted directly to FNB as per the details on the cover letter. Interest Rate The interest paid on the loan is prime less 0.5% on the variable rate option. Loan repayments The monthly premium will be deducted from salary by the employer. The amount depends on the size and term of the loan.

67 CRF Client Procedure File 2017/18 Page 67 of 85 INVESTMENT PORTFOLIOS AVAILABLE TO MEMBERS The Board of Trustees reviews the investment options for members on a regular basis in order to ensure that the Fund offers members the most appropriate investment options in line with the current offerings in the market. The Growth Portfolio (GP) is the default investment portfolio. The purpose of the Growth Portfolio is to provide a market linked investment vehicle, which offers high investment returns. The Protection Portfolio (PP), introduced during 2007 is available to members over the age of 50 years. The purpose of the Protection Portfolio is to offer an investment vehicle where members can protect their capital investments close to retirement. The Trustees would only recommend this portfolio when a member is within three months of retirement. To further enhance the investment offering the Trustees introduced an additional portfolio called the Moderate Portfolio (MP), which is also available to members who have attained the age of 50. Moderate Portfolio Management An investment committee meets on a regular basis to discuss the allocation between the various asset classes, e.g. equities, property, bonds or cash. This investment committee consists of trustees and various investment advisors. These individuals bring different investment skills and knowledge to the table in terms of equities, bonds, other asset classes and economic indicators. Shari ah Investment Portfolio The CRF Trustees have agreed to implement a Shari ah investment portfolio (SP), which meets the requirements of the Shari ah law and the principles articulated for Islamic finance. Members who wish to switch in or out of the Shari ah Portfolio will be allowed one switch during a financial year, by completing the required switch form that will be available on the CRF website from 1 July. Members will be able to transfer 100% of their member share to the Shari ah Portfolio. No administration fee is payable for this switch. TO ILLUSTRATE THE RISK VERSUS RETURN

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