P E R S ONAL PORTFOLIOS P R E SERVATION FUNDS D e f i n i t i o n A preservation fund is an approved and registered pension or provident fund. Employees, who leave their employer, (whether through resignation or dissolution of their pension/provident funds), can invest their pension or provident fund benefits in a preservation fund. A fund is a separate legal entity and is created to pay benefits to members at retirement or to dependants at death of the member. The fund must comply with legislation (Pension Funds Act) and must be registered with the Registrar of Pension Funds. The fund must also be approved and registered with the Commissioner of SARS. Each approved fund will have its own (FSB) registration number and its own SARS registration number. Although the assets belong to the fund, the member can manage his/her investment within the ambit of the fund rules, the Pension Funds Act, and decisions made by the trustees. B e n e f i t s The benefits of investing in preservation funds are: Preserving accumulated retirement funding towards retirement One full or partial withdrawal may be allowed before retirement Assets in the preservation fund are protected when the member is declared insolvent The transfer into the preservation funds may be tax neutral E m p l o y e r s f u n d When the member of an employer s fund resign from his/her employer, the member has the following option: Transfer the full benefit to an approved fund Withdraw the full portion (less tax) in cash Combination of both
When a portion is taken in cash the member no longer forfeits the once-off withdrawal from the preservation fund, according to RF1/2011. The transferring fund may place a restriction on the ROT limiting the member to no withdrawals, or a maximum withdrawal amount before retirement. R e g i s t r a t i o n Preservation Pension Fund FSB fund registration number 12/8/35100 SARS tax registration number 18/20/40/39519 Preservation Provident Fund FSB fund registration number 12/8/35101 SARS tax registration number 18/20/40/39519 I n s o l v e n c y The member s benefit, while in the preservation fund, is protected against insolvency. The retirement benefit does not form part of an insolvent estate. The preservation pension and preservation provident fund is the rightful owner of any units bought by the trustees. T y p e o f i n v e s t o r Only natural persons are allowed to invest their build up employers pension/provident money or money from another Preservation Fund in the Personal Portfolios Preservation Fund. F u n d i n g a P r e s e r v a t i o n f u n d Investments into Preservation funds Only fund benefits from a registered fund may be invested in a preservation fund. No own money can be invested in this product. Money into the preservation fund can also only be invested by means of the following: Lump sum single premium Ad hoc allowed as an exception, unless it is interest, improved fund benefits, or surplus money from the same transferring fund. NO recurring premiums are allowed to be invested in these products
Money from the following sources are allowed to be invested in a preservation fund: Another preservation fund Employer pension fund Employer provident fund GEPF Interests/dividends and improved fund benefits Interest/dividends and improved fund benefits Only interest/dividends and improved fund benefits from the transferor fund will be allowed as an ad hoc on an existing preservation fund. If the member already has a preservation fund with Glacier, and receives money from another preservation fund/employer fund, he/she must invest it in a new plan. M i n i m u m i n v e s t m e n t a m o u n t New business = R100 000 Ad hoc = R15 000 T e r m i n a t i o n o f m e m b e r s h i p A member can exit the Preservation fund at any time by ending his/her membership. A member s membership of the fund will therefore terminate in the following instances: Death of the member Retirement after age 55 Disability Withdrawal of part or full benefit before retirement (one withdrawal allowed) Transfers the benefit in the Personal Portfolios Preservation fund to another approved preservation fund or RA Dissolution of the personal portfolios preservation funds Divorce Note: Members of the Personal Portfolios Preservation Pension and Provident Fund can transfer their benefits from the Personal Portfolios Preservation Provident Fund to a retirement annuity when terminating their membership. The fund rules only allow transfers to a retirement annuity, not from a retirement annuity.
T r a n s f e r s Transfers from Employers Pension/Provident funds A member can take a portion in cash when resigning from the employer s pension/provident fund and still be entitled to do a once-off withdrawal before retiring from the preservation fund. The withdrawal from the employer s pension/provident fund is no longer seen as the first and final withdrawal. The ROT from the employers fund is still the most important indication if further withdrawals will be allowed after the funds was transferred to the Preservation Fund. Transfers from a Preservation fund to a Retirement Annuity Members can now transfer from a Preservation fund to a Retirement Annuity this transfer will be a tax neutral transfer. Members of the Personal Portfolios Preservation Pension and Provident Fund can transfer their benefits from the Personal Portfolios Preservation Provident Fund to a Retirement Annuity when terminating their membership. Transfers from preservation funds to RAs is not seen as the first and final withdrawal on the preservation fund (change in taxation law amendment bill 2012). Transfer to a foreign fund A member, who has benefits in the Personal Portfolios Preservation Funds, cannot transfer the benefit to an offshore retirement fund. A transfer can only be made to a fund that is recognised in South Africa. A recognised fund is a fund that has been approved by the (South African) Registrar of Pension Funds and the South African Revenue Services (SARS). An offshore fund would not be approved by the Registrar of Pension Funds or SARS. F e e s There are no Glacier initial fees. The intermediary is allowed to take an initial of between 0 5%, which is negotiable with the client. R e g u l a t i o n 2 8 Each Preservation fund plan has to comply with regulation 28. T r a n s a c t i o n s a l l o w e d The following transactions are allowed to be executed on preservation funds: One withdrawal before retirement Phasing in
Switch/Rebalance Maintenance Transfer to/from another approved fund E m i g r a t i o n Emigration is not applicable to Preservation funds. The member can therefore not commute his Preservation fund because of emigration. If the member did not do his/her one withdrawal yet, the member can do a full (or partial) withdrawal when emigrating before retirement. If the member has made his/her one withdrawal before retirement already, the member can only access the funds at retirement where the applicable retirement options will be available. (If the member retires and purchases a living annuity, the living annuity must be in South Africa. The income can be paid to a blocked account if the member has emigrated). D e a t h The member of a preservation fund can nominate someone to receive the benefit should he/she died. It is important though to notice that the trustees of the fund will have the final say in who receive the benefit at death of the member. Section 37 C of the Pension Fund Act determines that the trustees are responsible to ensure that the deceased dependants receive the benefit. Money as a result of death, (irrespective from which type of policy/fund the death benefits came from), may not be transferred to a Preservation fund. This money has to be transferred to a living annuity. W i t h d r a w a l s One withdrawal per transferring fund before retirement is allowed, providing that there are no restrictions on the ROT. A withdrawal will only be allowed if no previous withdrawals have been made from the fund. A member can withdraw at any time. If the member is 55 or older, they can retire from the fund. There is no need to retire from all funds when retiring from one. Employment status does not determine if a member can make a withdrawal or not. If the transfer benefit was split (a portion was invested in a retirement annuity) the member may still do a once-off withdrawal before retirement from the preservation fund. If the benefit was reduced due to divorce pension interest that was paid, the member may still do a once-off withdrawal before retirement from the preservation funds. If a transfer benefit was reduced according to Section 37D, the member may do another withdrawal from the preservation fund, as determined by RF1/2011, irrespective of the date when benefit was reduced.
The following types of withdrawals are allowed: Full withdrawal Partial withdrawal The withdrawal can be made in the following ways: From specific funds Proportionately from all funds Wrap funds proportionately from all funds The plan value as at the date Glacier receives the IRP3, less tax (if applicable), is payable to the member.