Q & A Pension I
Can I defer retirement?
Yes, the Fund allows members to defer their retirement, i.e. leave their accumulated benefit and continue membership with the Fund after reaching normal retirement age and leaving their employer. This means that you are no longer forced to take your retirement benefit from the Fund when you still have other sources of income and don’t yet need it. In the event of your death, the retirement benefit will be paid out to your nominated dependents. Should you become disabled, you can retire from the Fund and access the benefit. All the investment portfolios you had before reaching normal retirement age will remain available to you at date of retirement/deferment.
Factors to consider when participating in Trustee Elections
The member-elected Trustees are your representatives on the Board of Trustees. You should therefore nominate someone who is responsible and honest, who will be able to represent your interests and who will be willing and able to perform the duties of a Trustee.
No persons can be elected as a Trustee if he or she:
- is disqualified from being a director in terms of an order under the Company’s Act, 1973 (this would typically be as a result of being convicted of a criminal offence involving dishonesty, fraud, theft, forgery or breach of fiduciary duty); or
- has been removed from an office of trust on account of misconduct; or
- is an un-rehabilitated insolvent; or
- is a minor.
Tax on withdrawal benefits?
Benefits taken in cash will be taxed as follows:
|Lump sum withdrawal benefit||Tax liability|
|R0 to R25 000||0%|
|R25 001 to R660 000||18% of the amount above R25 000|
|R660 001 to R990 000||R114 300 + 27% of the amount above R660 000|
|R990 001 and above||R 184 950 + 36% of the amount above R990 000|
The tax-free threshold of R 25 000 and tax table will be cumulative and will apply to the total amount of your withdrawals from funds in your lifetime. In addition, the tax concessions granted on withdrawal will reduce the tax concessions at retirement.
Tax rates and limits can change at any time so make sure you get up to date information on the effect tax on your benefits before you make any decisions. Therefore, if you elect to take your withdrawal benefit in cash, not only do you severely prejudice your future retirement savings, but you also significantly reduce the tax concessions that you will receive at retirement.
What factors to consider when thinking of taking early retirement
There are a couple of negative factors that you need to consider before thinking of early retirement:
Loss of future earnings: The earlier you retire the more certain you need to be that your savings will last until you die. You must accept that you are forfeiting the opportunity to increase retirement savings.
Reduction of income: You lose fringe benefits and often also employer contributions to your medical scheme. Your pension will invariably be lower than your salary at retirement.
The best financial years of your life: The last 10 years before retirement is normally a period when you have no dependent children, allowing you to increase your savings. You are also able to achieve the biggest growth on your investments due to the large capital that you have built up in your fund. This is when the full force of compound interest is at work.
Your level of debt: You should have paid off your debts by the time that you retire. You should postpone your retirement if you have a high level of debt. You will reduce your pension significantly if you use the lump sum benefit that you receive at retirement to pay off your debts.
Emotional preparation: Many people are simply not prepared for retirement and find it very difficult to adapt to a quieter life – some experience severe depression and a loss of belonging. Plan ahead and ensure that you have hobbies or activities outside the workplace that you would be interested in being involved in.
What is compound interest?
The graph below illustrates the impact of compound interest. Quite simply, compound interest is the process whereby interest is earned not only on the capital invested, but also on all interest earned previously as well. i.e. Interest on interest! No wonder Albert Einstein said that compounded interest was one of the strongest forces on earth. If you save a R100 per month for 40 years at 10% compound interest per year you would have saved almost R600 000. If you saved a R100 per month for 20 years and then left the money to grow for another 20 years your money would grow to almost R500 000. The last line shows that if you only start saving R100 per month from the age of 40 (for 20 years) you will only have saved approximately R90 000.
What is the Fund's default annuity?
Old Mutual Fund Select Annuity
Since there are so many annuity options at retirement, making the right choice can be difficult. That’s why the ISASA Trustees offer you the Old Mutual Fund Select Annuity (FSA). The Trustees believe it is a good solution for many members because it is easy to invest in, and it provides a reliable monthly pension for life.
Best of all, it is cost effective because the charges you will pay are similar to those that are usually only available to staff of big companies, not individuals.
Benefits of the FSA:
- It is safe – as it will last your whole life;
- It is cost-effective – as it’s offered to you at good rates that would normally only be available to employees retiring from a big company; and
- It is trusted – it has been chosen by your Fund trustees and is offered by Old Mutual.
Members who are ten years from retirement will receive an FSA quotation via e-mail. The quotation will give you a good idea of what you can expect to receive as a monthly income after retirement, based on your current Accumulated Credit. Thereafter you will receive these quotes every six months until you retire.
Remember: The Old Mutual Fund Select Annuity does not replace personal financial advice. If you are unsure about any big financial decision, getting personal financial advice is always a good idea.
If the Old Mutual Fund Select Annuity sounds like it could be a good way for you to secure your retirement income for life, why not find out more by contacting Old Mutual at Old Mutual Fund Select Annuity Service Centre on 0860 388 873 or email FundSelect@oldmutual.com.
Where can I complain if I am not satisfied with the manner in which my fund issues are handled?
The ISASA Pension Scheme and Provident Fund take your complaints and concerns seriously and it is therefore important that you share your experiences and interactions with us.
Should you wish to lodge a complaint, you may do so in one of the following ways:
- Email ISASA your complaint directly to ISASAComplaints@oldmutual.com
- Contact your Bursar who will direct your complaint to the relevant person at Old Mutual
- Contact your regional representative Trustee who will direct your complaint to the relevant person at Old Mutual
YOUR COMPLAINT SHOULD INCLUDE THE FOLLOWING INFORMATION:
- Your full name and contact information
- Your member and ID number
- Exact details of the complaint
- What outcome you expect
WHAT THE FUND WILL DO:
We will do our best to resolve the complaint within 10 working days and provide you with feedback. Some complaints are more complex and can take much longer to be resolved. If this is the case, your complaint will be escalated.
Once escalated there could be a further delay of 10 working days.
Escalations may be made to the Principal Officer, Mr John Rollason, on the contact information below:
Fax: 086 689 3134
Mobile: 082 442 4598
Once your complaint is resolved the Fund will:
- Provide you with full and appropriate redress should it be resolved in your favour ; OR
- Provide you with full reasons why your complaint was not upheld.
IF YOU ARE NOT HAPPY WITH OUR RESOLUTION:
If you are not satisfied with the feedback provided to you, you may contact the Pension Funds Adjudicator on the details set out below:
|Telephone||012 346 1738|
|Fax||086 674 9372|
|Postal Address||PO Box 580
|Physical Address||4th Floor Block A
Riverwalk Office Park
41 Matroosberg Road