New tax regulations from 1 March 2015 gives retiring members the opportunity to postpone payment of their retirement benefit until a later date than the retirement date indicated in the rules of the fund. You may choose to retire from the fund on a date on or after the ‘normal retirement age’ as prescribed by the fund rules.

Your monthly contributions are invested either as per your employer’s default investment strategy or in accordance with your own instructions, provided that your fund option allows member investment choice. Each investment strategy has one or more underlying investment portfolio. Download more information on retirement investments.

Your member share represents your accumulated value in the Fund. It is the sum total of all amounts transferred from other funds (if applicable), all the contributions you or your employer have made, less operating expenses of the Fund and all the costs of insured benefits, plus the investment returns earned.

When you invest money, it earns interest. Soon after, your initial investment plus the interest earned will now earn interest – in other words, you receive interest on your interest. This is known as compounding – a powerful tool that can help you grow your money over time.

The bottom line is: the sooner you start investing, the harder compounding will work for you.

Year one: You invest one rand. You earn 10% interest on it. After one year, your rand will be worth R1.10.

Year two: Your R1.10 earns 10% interest. At the end of year two, your R1 investment is now worth R1.21.

In the first year, you earned 10c, but in the second year you received 11c – in other words, you earned interest on your interest, or compound interest. Compounding gets even more radical for share investors: you can re-invest dividends to buy new shares, which will then also pay dividends, which can then be re-invested to buy even more shares which will pay dividends, and so on.

Compounding has a dark side – however it will only work against you if you borrow money. The interest charged on your credit will earn more interest, quickly snowballing into a massive debt.

When you withdraw from the fund, for instance when you resign, are dismissed or get retrenched, you will have the following options with the benefit that pays out:

• You can have the benefit transferred to a new employer's pension or provident fund
• You can have the benefit transferred to a retirement annuity fund
• You can have the benefit transferred to a registered preservation fund
• You can withdraw the benefit amount in a cash lump sum (subject to tax)
• You may have the option to leave the benefit amount in the fund, as a paid-up benefit until you retire, if the rules of the fund allow you to do so.

The fund may have to make one or more deductions from the benefit depending on whether it is transferred to another retirement fund or paid out in cash.

• The fund must obtain a tax directive from SARS before any cash lump sum payment can be made. Any tax payable will be deducted from your cash lump sum benefit and paid to SARS by the fund.
• The fund may deduct and pay outstanding housing loan sureties, maintenance orders or unpaid divorce orders.

Retirement fund investments are not taxed. This means you can accumulate much more money for your old age in a retirement fund than in another investment, whether it’s an annuity or a unit trust. If you save the same amount of money in your retirement fund as you have saved in of another investment, you can almost practically double your retirement income. Your savings cannot be touched irrespective of future financial loss you may incur.

Benefit transferred
No tax is payable if you transfer your benefit to a new employer’s pension and/or provident fund, a retirement annuity fund and/or a pension preservation fund or provident preservation fund. Note that although the withdrawal benefit is taxable income in your hands, the amount transferred to another fund is tax deductible and no tax is therefore payable. Tax is however payable where the transfer is from a pension fund to a provident fund.

Benefit paid out in cash
Withdrawal benefits taken in cash are taxable according to the withdrawal tax table of the Income Tax Act.

According to the Divorce Act, your pension fund, provident fund, retirement annuity fund or preservation fund will be regarded as assets in the case of divorce. Sections of the Act may therefore allow your ex-spouse to get a portion of your retirement savings.

Then again, a Divorce Order must meet certain requirements before an ex-spouse can have any claim on your savings. Your former spouse will also need to submit certain documentation if they were to claim from your retirement savings.