RETIREMENT BENEFITS
On retirement your member share becomes payable to you as a benefit. The benefit you receive will also be taxed. The amount of tax depends on the savings amount and what you choose to do with it. For example, if you retire from employment and you elect to take the maximum permitted cash lump sum, your tax will be much higher than if you took a small amount in cash and invested the balance to provide you with a monthly pension.
All members of the LA Retirement Fund have a normal retirement age of 65, however, you may be eligible for early retirement from age 50 (please note that taxation of any lumpsums prior to age 55 will be taxed in terms of the withdrawal taxation table and not the retirement taxation table). You may also choose to keep on working beyond age 65, but this will require the consent of your employer. Alternatively you may choose to retire from employment but elect to postpone receiving your retirement benefit from the fund to a later date (i.e. phased retirement from the fund). When you later choose to receive your retirement benefit from the fund, your original benefit on retirement from service will be increased or decreased by the relevant fund returns to the date that you made your final election, and your benefit will be calculated in terms of the fund’s rules.
In terms of the rules of the fund, applicable to phased retirement, your member share will be debited with such reasonable expenses as the Board of Trustees may determine from time to time in line with the fund’s agreed practice.
You may exercise one of the following options on retirement:
Elect a phased retirement from the Fund.
Use your full benefit to purchase an In-Fund Living annuity (IFLA) and/or Pooled Annuity Account (PAC) from the Fund or
Take part of your benefit as a cash lump sum and use the balance to purchase an In-Fund Living annuity (IFLA) and/or Pooled Annuity Account (PAC) from the Fund (click here for more on In-Fund living) or
Use your full benefit to purchase more than one annuity which may include the In-Fund Living annuity and/or Pooled Annuity Account (PAC)
Take part of your benefit as a cash lump sum and use the balance to purchase more than one annuity which may include the In-Fund Living annuity and/or Pooled Annuity Account (PAC)
Transfer your full benefit to a retirement annuity or preservation fund (subject to SARS approval) or
Take 100% of any vested right as a cash lump sum plus a maximum of 1/3rd of your non-vested right in cash and purchase an annuity (IFLA and/or PAC as above) with the remaining 2/3rd non-vested right.
Click here for more information.
The payment of cash lump sums on retirement is subject to the annuitisation rules that came into effect on 1 March 2021. Please click here to read more about this.
All insurance benefits (death, disability, funeral and the voluntary critical illness benefit) cease when you retire from the Fund. If you purchase the In-Fund Living Annuity you have the once-off option of purchasing an affordable funeral cover benefit for yourself and your spouse through Sanlam Sky Solutions. You may choose the cover amount applicable to your age group. The application form provides all the details you need – access it from the forms section of this website.
If you elected the Voluntary Extended Family Funeral cover benefit as an active member of the Fund, this cover continues into your retirement as you are already the policyholder of a Sanlam Sky Solutions policy.
The cash portion of your retirement benefit is subject to tax as shown in the tax table below, please be aware that the tax tables may change from time to time.
See the SARS website for the latest tax tables.
https://www.sars.gov.za/tax-rates/income-tax/retirement-lump-sum-benefits/
Deductions
In terms of section 37A of the Pension Funds Act, no benefit of a member may be reduced, transferred, ceded or pledged by a fund other than as provided for in the Act. For the same reason, a member in debt may also not pledge, transfer or cede their retirement benefit to satisfy that debt.
Section 37D of the Pension Funds Act permits certain deductions from a member’s retirement fund benefit. These are:
Amounts due in respect of housing loans, granted by the fund/employer or for which the fund/employer agreed to stand surety;
Pension interests awarded to former spouses on divorce;
Maintenance claims awarded against the member and the fund;
Damages due to an employer caused by a member’s misconduct;
Amounts specifically approved by the Registrar.
Click here for more on Section 37D.
