April 2016 Dear Member, PPS PERSONAL PENSION RETIREMENT ANNUITY FUND ANNUAL MEMBER COMMUNICATION On your journey towards your retirement, it is important to ensure that your investment remains suitably structured and that you understand all the information relating to your investment contract and your membership of the PPS Personal Pension Retirement Annuity Fund ( the Fund ). This annual member communication covers: An overview of the retirement fund reform proposals. Legislative amendments which may affect members of the Fund. Important information relating to the registration of the Fund and contact details. Changes made during 2015 to the Fund s appointments, such as the board of trustees, principal officer and administrator. Amendments to the Fund s rules made during 2015. Important matters that should be reviewed regularly. We urge you to go through this information carefully and to keep this document for future reference. Should you have any queries or require further information, please contact the PPS Investments Client Service Centre on 0860 468 777 (0860 INV PPS), Mondays to Fridays between 08:00 and 17:00, or at clientservices@ppsinvestments.co.za. Yours sincerely, Megan Young Principal Officer PPS Personal Pension Retirement Annuity Fund Page 1 of 5
A. Retirement fund reform There has been extensive mention in the media recently about retirement fund reform, and the proposals made by National Treasury to strengthen South Africa s retirement fund industry. National Treasury aims to do this by encouraging South Africans to save more towards their retirement and encouraging members to preserve their retirement capital rather than taking cash lump sums. Some confusion has arisen regarding changes that will apply to retirement funds, so we would like to simplify this for you. The legislative changes that have occurred, are summarised below. In addition there are proposals that have been made by National Treasury with regard to the annuitisation of provident funds, where provident funds members will be required, upon retirement, to purchase an annuity with two thirds of their fund value in the same manner as retirement annuity fund and pension fund members. These annuitisation proposals for provident funds have not become law, and are expected to come into effect in March 2018. No changes have been made regarding compulsory preservation of fund benefits. B. Legislative changes Tax deductibility of contributions Prior to 1 March 2016, a member could claim a tax deduction for contributions made to his or her retirement annuity fund of up to 15% of non-retirement funding income, or R1 750, whichever was greater. From 1 March 2016, a member can claim a tax deduction for all contributions made towards a retirement annuity fund, pension fund and provident fund, of up to 27.5% of his or her taxable income or remuneration, whichever is the greater, capped at a maximum deduction of R350 000 per tax year. Unclaimed deductions are carried forward to subsequent tax years and, to the extent not claimed, can be used to reduce the taxable portion of any lump sum taken at withdrawal, retirement or death. Cash lump sums at retirement Prior to 1 March 2016, when a member elected to retire from a retirement annuity fund, he or she was required to purchase an annuity with at least two thirds of the fund value, unless the total fund value was less than R75 000, in which case he or she could take the full fund value as a cash lump sum and not be required to purchase an annuity. From 1 March 2016, this minimum threshold has increased from R75 000 to R247 500. In other words, if the member retires and has a fund value of less than R247 500, he or she can take the full amount as a cash benefit and does not have to purchase an annuity. Withdrawal prior to retirement /emigration Prior to 1 March 2016, a member under the age of 55 years was entitled to withdraw the full fund value as a cash lump sum if he or she formally emigrated, as confirmed by the South African Reserve Bank. From 1 March 2016, a member under the age of 55 years may withdraw the full fund value as a cash lump sum if he or she ceases to be a resident (as determined by the South African Revenue Service), or upon the expiry of a working visa or visiting visa. Formal emigration is no longer a requirement, however Exchange Control Regulations will still apply in respect of money remitted offshore. Contributions and estate duty Contributions made to a retirement annuity fund, which could not be deducted by the member during his or her lifetime because they exceed the allowed limits, can be used to reduce the taxable portion of the lump sum paid to beneficiaries on the death of the member for the purposes of income tax. Previously the full lump sum paid to the beneficiaries was PPS Personal Pension Retirement Annuity Fund Page 2 of 5
excluded for the purposes of estate duty calculation. This resulted in no tax being levied on the portion of the lump sum attributable to the contributions, and created a tax loophole. The position has now changed: unclaimed contributions can still be used to reduce the taxable portion for income tax purposes, but the amount claimed as an income tax deduction against the lump sum at death will be included into the estate duty calculation and potentially subject to estate duty. This amendment applies to contributions made from 1 March 2015 and to deaths that occur from 1 January 2016. C. Important information about the Fund Fund registration Registered fund name: PPS Personal Pension Retirement Annuity Fund Financial Services Board number: 12/8/37739 South African Revenue Service number: 18/20/4/041988 Valuation exemption number: 280359 Registered office: Ground floor, Travers House, Boundary Terraces 1 Mariendahl Lane, Newlands, 7700 Fund administration The Fund has outsourced its administration in terms of 13B of the Pension Funds Act. With effect from 1 January 2016, the Fund has appointed Maitland RAS Proprietary Limited as its administrator. Board of trustees The trustees are: Ms Prem Govender Mr James Downie Mr Hugh du Toit Mr Anton Bosch Adv Thinus Ferreira (Independent trustee and chairperson) (Trustee) The Fund has been exempted from the requirement that 50% of the trustees must be elected by members. For more information on the trustees, please log on to www.ppsinvestments.co.za and click the Your Trustees tab. Ms Megan Young was appointed the Principal Officer from 23 September 2015. Fund rules and amendments The Fund s rules are registered with the Financial Services Board, and govern your membership of the Fund as well as the Fund s management and operation. The Fund rules may be examined at the Fund s registered office during business hours at a time convenient to the Principal Officer. Copies may also be requested from the PPS Investments Client Service Centre. PPS Personal Pension Retirement Annuity Fund Page 3 of 5
The following amendments were made to the Fund rules during 2015: The rules were amended to require a minimum of four trustees, the majority of whom must be independent. A trustee s term will expire three years after appointment. Upon the expiry of the three year term, the trustee may be appointed for a further three year term at the discretion of PPS Investments. This amendment if effective from 19 February 2015. The Pension Funds Act was amended to introduce the concept of a deputy principal officer. The rules were accordingly amended to enable the Fund to appoint a deputy principal officer should the Fund so require. This rule amendment is effective 1 September 2015. The rules have been amended to create clarity on the process to be followed in the event that the trustees are unable to reach a majority decision. This rule is effective from 1 January 2016. The rules have been amended to allow the trustees, from time to time, to determine the eligibility requirements for membership of the Fund. This rule is effective from 1 January 2016. D. Complaints procedure If you are not satisfied with this investment or the services from the Fund, a written complaint can be submitted to the Principal Officer using the contact details below. The Fund will acknowledge the complaint in writing and will inform you of the contact details of the person addressing your complaint. You will receive a response to your complaint within 30 days. PPS Personal Pension Retirement Annuity Fund Tel: 0860 468 777 (0860 INV PPS) PO Box 44507 Fax: 021 680 3680 Claremont Website: www.ppsinvestments.co.za 7735 Email: clientservices@ppsinvestments.co.za If you are not satisfied with the response from the Fund, or if you have received no response within 30 days, you have the right to lodge a written complaint with the Pension Funds Adjudicator. The Pension Funds Adjudicator Tel: 012 346 1738 PO Box 580 Fax: 086 693 7472 Menlyn Website: www.pfa.org.za 0063 Email: enquiries@pfa.org.za If you have a complaint about the advice given by your financial adviser, you have the right to address your complaint in writing to the Ombud for Financial Services Providers. The Ombud for Financial Services Providers Tel: 012 762 5000 PO Box 7451 Fax: 086 764 1422 Lynnwood Ridge Website: www.faisombud.co.za 0040 Email: info@faisombud.co.za E. Important matters to review regularly Review your beneficiary nomination The payment of death benefits from a retirement fund is governed by s37c of the Pension Funds Act. This means the trustees must determine who your dependants are, and based on the circumstances of each individual, pay the benefit in such proportions that they deem fair and equitable. A beneficiary nomination made by the member is not binding on the trustees, however they may take it into account when determining a fair and equitable distribution. Your personal and financial circumstances may have changed over the last year, so it is important to review your beneficiary nomination and update it if necessary. PPS Personal Pension Retirement Annuity Fund Page 4 of 5
Your nominated beneficiary must be a natural person. You may nominate a trust to receive and hold the benefits on behalf of that person, but this is not binding on the trustees. Please do not nominate your estate as a beneficiary as the trustees may only pay benefits to the estate in the event that there are no dependants and no other nominees. Review your savings goals With the assistance of your financial adviser if necessary, you should regularly review whether you are saving enough to meet your retirement needs. The new increase in the tax deductibility of contributions is a great way of saving more towards your retirement and being able to reduce your tax. Review your planned retirement date You may elect to retire from the Fund at any time after the age of 55 years, unless there is an earlier retirement due to disability or ill health. The longer your retirement capital remains invested in the Fund, the more it can grow. Remember also that investments within the Fund are exempt from income tax, capital gains tax and dividend withholding tax. Review your investment options Regularly review your investment plan to determine whether your selected investment options are appropriate to your age and personal financial circumstances, with the assistance of your financial adviser if necessary. Younger members may be able to tolerate the risks in a more aggressive portfolio over a longer term of investment, whilst older members approaching retirement may wish to implement a strategy that minimises the potential for capital loss. There are no fees charged for switching investment options, but be aware that if your current investment enjoy a grandfathered status in terms of Regulation 28, you will lose this status when you switch to another portfolio. PPS Personal Pension Retirement Annuity Fund Page 5 of 5