Resignation, Dismissal or Retrenchment Benefits
What options do I have at Resignation, Dismissal or Retrenchment?
On resignation, dismissal or retrenchment you may withdraw your Accumulated Retirement Savings from the UCTRF. However, your Retirement Pot may not be taken as a lump sum and must either be preserved in the UCTRF or transferred to Another Retirement Fund.
If you choose to preserve your Retirement Pot on the UCTRF any balance in your Savings Pot and Vested Pot that you do not take as a lump sum, must also remain in the UCTRF.
If you transfer your Retirement Pot to Another Retirement Fund, any balance in your Savings Pot and Vested Pot that you do not take as a lump sum, must be transferred to the same retirement fund.
Your options for your Vested Pot, Savings Pot and Retirement Pot are as follows:
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· You can take your entire Vested Pot as a lump sum. If you take a lump sum it will be taxed. · You may preserve your Vested Pot in the UCTRF or Another Retirement Fund. · You can also take a portion as a lump sum and transfer the other portion to Another Retirement Fund. (You may not take a portion of your Vested Pot as a lump sum if you want to preserve in the UCTRF.) Any portion of your Vested Pot that is preserved will not be taxed. · If you take your money as a lump sum, you may also pay a significant amount of tax, as only a small portion is tax free. Please refer to the Taxation of Benefits section. |
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· You may not take any part of your Retirement Pot as a lump sum. You may preserve your Retirement Pot in the UCTRF or Another Retirement Fund. It will not be taxed. |
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· If you have not withdrawn from your Savings Pot in the tax year, you can take all or part of your Savings Pot as a lump sum. · If you have withdrawn from your Savings Pot in the tax year, you can only take your Savings Pot as a lump sum if the balance is less than R2000. · Any portion you take as a lump sum, will be taxed at your marginal tax rate. Please refer to the Taxation of Benefits section. · You may preserve the balance in your Savings Pot in the UCTRF or Another Retirement Fund (depending on where you preserve your Retirement Pot). Any portion of your Savings Pot that is preserved will not be taxed. |
While taking the maximum amount possible as a lump sum is a tempting option for many people, this might mean the difference between a retirement of leisure and one filled with financial worries.
If you choose to transfer your benefit to Another Retirement Fund, your Vested Share and Non-Vested Share in your Vested Pot, your Retirement Pot and your Savings Pot will be transferred proportionally to the retirement fund you choose. (However, you may elect to transfer your Vested Pot and/or Savings Pot to your Retirement Pot in your new retirement fund.)
What are my preservation options?
Preserve in the UCTRF
Leave your Retirement Pot, Savings Pot and Vested Pot in the UCTRF as a Deferred Pensioner. Your Accumulated Retirement Savings will remain invested in the portfolio/s of your choice. Administration costs will be deducted from your Accumulated Retirement Savings monthly. You also have the advantage that the Board monitors the performance of the investment managers with whom your money is invested on an ongoing basis. Should you elect this option you will be required to preserve your benefit as a whole, i.e. you may not transfer a portion to Another Retirement Fund and leave the balance in the UCTRF.
If you elect this option you may elect to withdraw all or part of any balance in your Savings Pot at a later date (but only once per tax year). You may also withdraw the full amount in your Vested Pot at a later date before age 55 (after 55 this will be treated as a retirement).
You may also elect to transfer your Retirement Pot, Vested Pot and any balance in your Savings Pot to Another Retirement Fund as set out in Two below.
If you leave your money in the UCTRF, you may receive your Retirement Benefit at any time from age 55 onwards.
What is the difference between the various retirement funds that I can transfer to?
The different retirement funds are explained below.
- Your new company's Pension or Provident Fund: This will operate in a similar way as the UCTRF and similar rules on retirement or resignation/dismissal/retrenchment will apply. No additional administration fee or commission will be payable on transferring your benefit. The contribution rate will be in terms of the rules of the new fund.
- A Retirement Annuity: There is a range of Retirement Annuity funds to choose from with an assortment of different investment options. Speak to your financial advisor on the different options available to you. You may make monthly contributions towards a Retirement Annuity, which are tax deductible up to certain limits. (Note that you do not have the option to withdraw from your Vested Pot and Retirement Pot before retiring. However, you may still withdraw from your Savings Pot.)
- A Preservation Fund: There is a range of Preservation Funds to choose from with an assortment of different investment options. Speak to your financial advisor on the different options available to you. You can retire from a Preservation Fund between the ages of 55 – 70 years. You may not make monthly contributions towards a Preservation Fund. You can transfer from one Preservation Fund to another, but there are costs involved. The main disadvantage of this option is that your costs may be higher when compared to leaving your money in the UCTRF. You could pay commission at entry and the ongoing administration fee could be as high as 0,5% per annum of the market value of your assets. The investment management fee could be as high as 1,5% per annum of the market value of your investment. You (or your financial advisor) also need to monitor the performance of the investment managers with whom your money is invested on an ongoing basis.
For an indication of the tax payable on withdrawals from your Savings Pot see the Benefit Taxation Calculator.
What Deductions are Made from my Resignation, Dismissal or Retrenchment Benefit?
These include:
These amounts will be deducted proportionately from the Vested Share and the Non-Vested Share in your Vested Pot, your Savings Pot and your Retirement Pot.
For more information on the tax payable on resignation, dismissal or retrenchment, please see the Taxation of Benefits section.
Differences between the various options
|
Cash benefit |
Leave benefit in UCTRF: Deferred Pensioner |
Transfer benefit to your new company's fund |
Transfer benefit to Retirement Annuity |
Transfer benefit to Preservation Fund |
Monthly Contributions allowed |
n/a |
No |
Yes |
Yes |
No |
Future withdrawal allowed |
n/a |
Yes |
You will be able to withdraw from your Savings Pot. You can only access your Vested Pot but only on resignation, retrenchment, or dismissal from your new Employer. You can only access your Retirement Pot on retirement. |
You will be able to withdraw from your Savings Pot. You can only access your Vested Pot and Retirement Pot on retirement after age 55. |
You will be able to withdraw from your Savings Pot. You have one opportunity to withdraw all or part of your Vested Pot. You can only access and Retirement Pot on retirement after age 55. |
Benefit Taxed |
Yes |
No |
No |
No |
No |
Deciding on the best option can be complicated and you should consult your financial advisor to ensure that you fully understand the implications of any decision you make. For further information regarding appointing a financial advisor and preferential rates offered to UCTRF members, click here.
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