Question:
My fund says that I can't cancel or commute my investment in their retirement annuity if the value is greater than R50 000, although in the next sentence they say that 'In certain circumstances a commutation may be allowed should the fund value fall below R75 000". My fund value is R70 000 and I need to cash it in. What are the "certain circumstances" referred to? How do I know if I meet those certain circumstance? Thanks, John
Answer:
Hi John,
The basic rule is that if you have a retirement annuity with a fund value less than R75 000 (when you choose to retire from the retirement annuity after age 55) then you are allowed to cash in the full amount. This does not apply if you have multiple retirement annuities; however, with a total value above R75 000. The R50 000 referred to refers to the two-thirds portion - if that is R50 000 or less then you can cash in (ie when your total retirement annuity is R75 000 or less) - this is the formulation in the tax act.
Otherwise, the R50 000 limit only applies to living annuities. If you buy a living annuity with the full proceeds of your retirement annuity then you can cash in the remainder of that living annuity when the value drops to R75 000. However, if you first took one thirds as cash before buying the living annuity, then you can only cash in the remaining living annuity once its value drops to below R50 000.
peak to a consultant if you have any further questions.
