Belinda Sullivan, Head of Corporate Consulting Strategy at Alexander Forbes responds:
Annuitisation is applicable to provident funds. If you were under the age of 55 years as at 1 March 2021, the money that has accumulated in your name up to 1 March 2021 is known as your vested portion.
This amount will earn investment returns and is kept as a separate record from your new money – you may access this full amount in cash at retirement, subject to the payment of any applicable tax.
All new money allocated to the fund from 1 March 2021 - i.e. your non-vested portion - will also have investment return allocated. This new money will be subject to the annuitisation rules at retirement.
If your non-vested portion is greater than R247 500, you can only take a maximum of one-third in cash and the balance will be used to buy a monthly pension of your choice.
If this value is R247 500 or less, then you may take the non-vested portion in cash, subject to the relevant taxation laws. If you are 55 years and older as at 1 March 2021 and on a provident fund, the annuitisation rule does not affect you, provided you stay on the same fund.
This means that your full benefit is a vested benefit that earns investment return and is recorded as such by the administrator. You may access the full amount in cash, subject to the relevant taxation laws.
If you change funds, the date of the change will become the date that your vested portion will accumulate to, for example, 30 September 2022. This vested portion and all future investment return on this vested portion will be accessible in cash.
Any new money allocated to the new fund will be treated as a non-vested portion and the annuitisation rules as described above will be applicable. It is always important to get the advice of an accredited financial planner to help you to understand the structure of your benefit and the options available to you in retirement.
Questions may be edited for brevity and clarity.
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