Please note that we cannot offer direct assistance, to help you resolve the specific administrative problems related to your claim. We do not have the resources to do so, or the authority to intervene on your behalf.
Who does what?
Your claim (also called your benefit or your fund withdrawal) is paid out of your RETIREMENT FUND (your employer’s pension or provident fund). By contributing, you become a MEMBER of the fund. The claim is processed by the FUND ADMINISTRATOR who has been appointed by the Fund TRUSTEES to keep records for the fund. Many questions imply that it is the employer who pays you your benefit. This is not the case.
Your EMPLOYER deducts and collects the fund contributions and forwards these to the fund administrator, who keeps a record of the contributions received, and then forwards the money (net of any deductions for admin costs and risk premiums, if applicable) to the investment manager.
The INVESTMENT MANAGER invests the money in shares, bonds and cash on your behalf. These investments generate investment income, which is credited to you fund account, net of any investment management fees. This income can be positive or negative, but over the long term is usually strongly positive.
How do I claim?
You can claim your retirement fund benefit when you leave your employer (through resignation, dismissal, retrenchment or retirement). To claim your benefit, you must get hold of a withdrawal notification form from your HR department, complete this and return with required supporting documents (proof of banking and ID) to your HR department. They will then counter-sign and forward it to the fund administrator for processing. The fund administrator will not accept a withdrawal form if this has not been signed by your former employer.
What is my payout?
Unless you are a government (or parastatal) employee, you will most likely belong to a defined contribution fund. This means that your benefit depends on the amount of contributions invested in the fund and the net investment return earned on those contributions. Your lump sum payout is subject to lump sum tax.
We don’t know what your actual payout will be. This depends on
- how much you and/or your employer has contributed to the fund
- what deductions came off the contribution (in terms of admin fees and risk premiums)
- the length of time your money was invested
- the investment return earned on your investment
- the fees charged by the investment manager that reduce your investment return
To see how much money you have in your fund, you should request a BENEFIT STATEMENT from your fund administrator. You should receive a copy of this at least once a year.
Do I get my employer’s contribution?
Some employees threaten their employees that they will not receive the company contribution if they resign, or resign within a certain period. That is not true. The fund administrator does not keep a separate record for employer and employee contributions, there is just one fund credit, which belongs to the employee. The Pension Funds Act stipulates what may be claimed or deducted from this balance, and it makes no mention of employer contributions.
How is the payout taxed?
On resignation, you are taxed per the withdrawal lump sum tax table. The first R25 000 is not taxed, the balance to R660 000 is taxed at 18%, the balance to R990 000 at 27% and the remainder at 36%. This table is applied to the aggregate of your retirement fund withdrawals, ie you only receive the tax-free amount of R25 000 once.
On retirement, the first R500 000 is not taxed, the balance to R700 000 is taxed at 18%, the balance to R1 050 000 at 27% and any amounts above that at 36%. Your tax benefit is reduced by any previous amounts you have withdrawn from a retirement fund, ie if you previously withdrew R500 000, you forgo the entire tax-free benefit.
What is the payout period?
This depends on the administrator, on the efficiency of their processes, on the motivation of their staff, and on the claims backlog. It normally takes between 4 and 12 weeks, from the time your fully completed documents are received, or your final contribution (whichever is the later). Industry funds may have a longer waiting period, in case you should join another company in the same industry (in which case your claim will not be paid out). You can only withdraw from an industry fund when you leave the industry.
Note that the clock only starts once the administrator has received your last contribution or your instruction form, whichever is the later. So if you resign at the beginning of the month, it will take almost a month before your fund receives your final contribution from your employer. The payout process only starts at that point.
What if my payout is delayed?
If the payout takes longer than expected, or indicated by your fund administrator, then you should follow up with the fund administrator to see what is holding up the process, to confirm they have received all the required documents, and that there were no problems with SARS that you need to resolve. If the administrator does not give you any joy, you should ask your previous HR department to ensure they follow up on your behalf.
Failing this, you need to lodge a formal complaint, using the fund administrator’s formal complaints procedure. You should find the details of this procedure either on the administrator’s website or in their fund literature. If they do not respond, you can escalate the matter to the Pension Funds Adjudicator.
What if my employer refuses to forward my claim to the administrator?
We receive many questions of this nature. If you abscond, or leave on bad terms, then the HR department may get stroppy and refuse to give you a copy of the withdrawal notification form, or refuse to sign it, or delay passing it through to the fund administrator.
But your former employer is bound by the fund rules to submit the completed claim forms to the fund administrator. If they do not do so, they are in breach of the fund rules. It is the duty of the Fund trustees to ensure that the Fund complies with the rules, so you need to inform the Trustees that your former employer is not signing and submitting the claim form. To this end, you should therefore send a registered letter to the Fund Trustees (typically care of the fund administrator) informing them that the employer is preventing you from claiming your fund. You may want to send a copy of the letter to your former employer (Head of HR, Head of Finance etc) by way of e-mail, so they are aware that you have taken this step. Failing this step, you can then report the matter to the Pension funds Adjudicator.
What if I forgot to claim my benefit when I resigned?
Your claim does not expire. After a certain period (two years or so), your benefit may be transferred to an unclaimed benefits fund. You know need to find out which fund administrator looks after the unclaimed benefits fund, and then comply with the claims process they have set down. Your former employers’ HR department (at each company) should be able to help you identify the responsible unclaimed benefits fund administrator, and give you the contact details.
If your former employer no longer exists (has closed down), you may have to track your money by contacting a financial adviser, who has access to the Astute system, to do a funds search for you under your ID number.
What is the death claim process?
We have written a separate blog on the retirement fund death benefit. In the event of your passing, your employer or your relatives must inform the fund as soon as possible. The employer must then submit a death notification form and a death claim form to the responsible fund administrator. Anyone who is a factual dependent would need to submit a dependency claims form to the Fund, for consideration.
