Umbrella Fund FAQs
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Who should consider using a pension or provident fund?
A pension or provident fund is appropriate for employers who wish to provide for their employees’ retirement. Such funds are tax-efficient savings vehicles and offer the following advantages:
- Access to a structured and disciplined investment plan that provides benefits in the event of retirement, retrenchment, resignation, disability or death
- Tax-free contributions, investment returns and cash lump-sum payments
- Option to add group life, disability and funeral cover
- Lower costs than individuals can generally secure for themselves
Although individuals can access similar tax benefit themselves, by investing in an RA, these are typically more expensive, do not offer the same flexibility and are not compulsory.
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What are the tax benefits of a pension or provident fund?
There are three tax benefits:
- Contributions are tax deductible. Employers may deduct up to 20% of an employee’s approved remuneration, and in the case of a pension fund, the employee may deduct a further 7.5%.
- Investment returns are tax free – there is no income tax or capital gains tax paid within the retirement fund.
- Benefits are taxed on a favourable basis – lump sum benefits are taxed on a sliding scale with a portion of the benefit tax free (see details under “What is the tax on your fund benefits?”)
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How are your pension or provident fund benefits taxed?
Lump sum benefits are taxed according to the following scale:
Tax Rate Withdrawal Lump Sum Retirement Lump sum 0% 0 – R22,500 0 – R315,000 18% R22,501 – R600,000 R315,001 – R630,000 27% R600,001 – R900,000 R630,001 – R945,000 36% R900,001+ R945,001+ Source: South African Revenue Service
Annuity payments are taxed as income, according to the personal income tax tables.
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When can employees access their pension/provident fund?
Employees can access their investment on leaving your employment:
- On retrenchment and resignation, called a withdrawal; or
- On retirement at retirement age (or earlier due to ill health).
The minimum retirement age of 55 (for reasons other than ill health) is defined by the Income Tax Act. There is no maximum retirement age.
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Can you transfer your company’s existing pension/provident fund to 10X?
Yes, you can transfer your pension or provident fund to 10X.
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What happens in event of the member’s death?
In line with section 37 of the Pension Funds Act, the trustees of the fund will distribute the proceeds, considering first the needs of their dependents and then the beneficiaries listed in their nomination form. It is thus important to fill in and update the nomination form annually. Their investment will be taxed on the same basis as on retirement.
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How do you join a 10X Umbrella Pension or Provident Fund?
Contact us at info@10x.co.za or call us 0861 109 109 to set up a formal presentation. On request, 10X will prepare a formal proposal, quotation and “Terms and Conditions” document for your approval.
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What is the cost of a 10X Umbrella Pension or Provident fund?
See the 10X Fee
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What reports can you expect from the 10X Umbrella Pension or Provident Fund?
10X issues regular performance updates:
Benefit statements. These are published online monthly, and emailed to members quarterly. The information is presented in a clear and simple manner, to avoid confusion. Once a year, the Fund sends out a hard-copy benefit statement to every member.
Investment report. This is published online every month and details the investment returns of all life stage portfolios and asset class benchmarks (equities, bonds, property and cash).
Investor portal. This portal gives you access to all your plan details.
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Who controls the affairs of a retirement fund?
Every fund must appoint a board of management to run the affairs of the fund. This is called the board of trustees. Each retirement fund must have at least four trustees.
In terms of Section 7A of the Pension Funds Act, members may elect at least 50% of the board of trustees. Umbrella funds may apply for exemption from appointing member-elected trustees.
In addition, the fund must appoint a Principal Officer, to deal with the day-to-day running of the fund.
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Can you appoint your own trustees to a 10X Umbrella Fund?
No, the 10X Funds are controlled by a professional and independent board of Trustees.
The independent members of the board are:
Jonathan Mort: past National President of the Pension Lawyers Association
Prof. Caspar Greeff: former head of WITS and Stellenbosch Actuarial Departments
Wanjiru Karima: Principal Officer FirstRand Group
November 03, 2011 at 10:49 am, Rochelle said:
Pension fund payout
How long does it take for pay out when you resign?
November 03, 2011 at 8:18 pm, 10X Investments said:
Rochelle,
If your affairs at SARS are in order and 10X have received all of the following:
Then payment should take a couple of days.
December 01, 2011 at 4:43 pm, Rebecca said:
Beneficiaries’ entitlement
is a deceased members benficiaries entitled to the emplyers share of contributions from a penion fund upon death
December 07, 2011 at 11:01 am, 10X Investments said:
Rebecca,
This is a legal question and you should consult a pension fund lawyer for a definitive opinion. Again, it will depend on the specific circumstances and the specific fund rules. Typically, in today’s defined contribution environment, the beneficiaries are entitled to the full amount in the member’s retirement fund account, including any employer contribution. If this question relates to a defined contribution fund, the fund rules will determine the amount that is due the surviving spouse or any beneficiaries. Per the Pension Funds Act, the minimum individual reserve is the larger of 1) the fair value equivalent of the present value of the member’s deferred accrued pension and 2) an amount equal to the value of the member’s contribution, less fund expenses, plus the fund return.
December 01, 2011 at 4:48 pm, Rebecca said:
Pension Fund beneficiary nomination form
Can a benficiary nomination form ,from a pension fund that has been dissolved be used as beneficiary nomination form in the new pension fund.
December 07, 2011 at 9:50 am, 10X Investments said:
Rebecca,
This is a legal question and you should consult a pension fund lawyer for a definitive answer. Typically, the answer will depend on the specific circumstances. So, if the initial pension fund was dissolved and all the assets of the fund were transferred to a new retirement fund, then it is reasonable to assume that the nomination form would “travel” with the assets. Invariably, though, the new fund would have called for new nomination forms, as the form must be addressed to the responsible fund. Certainly, if the fund was dissolved because the company wound up its operations, and employees moved to different employers and transferred their funds to their new employers, then the onus would rest on the individual to submit a new, signed nomination form to the new fund, as required by the Pension Funds Act. In that case, the new fund would not recognise the old form.
Remember also that the final discretion on the distribution of a retirement fund following a member’s death rests with the Trustees. They have an obligation to ensure that, first, all dependents are provided for. The Trustees may refer to the old form to help them identify such dependents.
March 07, 2012 at 11:27 am, Nomsa said:
Borrowing from an Umbrella Fund
Can one borrow money from the umbrella fund?
March 08, 2012 at 10:34 am, 10X Investments said:
Nomsa,
In principle, yes, if the rules of the umbrella fund permit. But only loans for a specific purpose are granted (effectively housing loans):
In terms of S19(5) of the Pension Funds Act, a registered fund (ie including an umbrella fund) may,
if the rules permit and subject to the regulations, grant either a loan to the fund member or furnish a guarantee
to another person who has extended a loan to the member. Such loans/guarantees must enable the member
to either repay their existing housing loan, or take on such a loan to pay for/erect/make alterations
to a residence in which the member, or their dependents, will live.
Such a loan or guarantee must be secured by a first mortgage on that property and/or by a pledge of the member’s fund assets.
It is quite a lengthy section in the Act, specifying the applicable conditions and regulations, and the potential size of the loan.
Be aware though that not all fund rules permit such housing loans.
March 19, 2012 at 1:55 pm, Mvuleni said:
When and how you may access your provident fund
hi i wana findout if I can access provident funds and buy shares
March 20, 2012 at 9:40 am, 10X Investments said:
Mvuleni,
You can only access your provident fund in the event that that you resign from your employer, or you retire (earliest age 55). If you are more than 10 years away from retirement, your 10X Provident Fund (in the event that you are a member) will already have the maximum allowed allocation to shares (equities), namely 75%.
If you wish to increase the contribution to your provident fund, you will have to speak to your employer, as only the employer can presently contribute to a provident fund. If the special rules of your fund permit, your employer may effect a salary sacrifice (ie pay you less, and invest that money in your provident fund instead). Your employer can presently claim contributions up to 20% of your income for tax.
Remember, your provident fund savings are managed by a third part asset manager, and it is not possible for you to direct the amount and type of shares your fund should buy. But if you are not with 10X, and you believe that, as a long-term investor, your present retirement fund does not provide you with sufficient exposure to shares, you should take this up with your Fund’s Board of Trustees or Management Committee.
April 20, 2012 at 12:16 pm, Monique said:
How long does it take for pension benefits to pay out?
How long does it take for Pension benefits and life insurance to pay out?
April 23, 2012 at 9:34 am, 10X Investments said:
Monique
At 10X, the timing standard for paying claims from a retirement fund is 14 business days from having received a copy of the completed and signed claim form, copy of ID and copy of bank account confirmation, assuming that the last contribution has been run.
For life insurance (GLA) the timing is dependant on whether the insurance is approved or unapproved.
Approved – benefit will be paid by the fund, together with fund credit, within seven business days of the trustee resolution having been passed. The timing of the trustee resolution is dependant on the complexity of the specific case e.g. number of spouses/ partners, number of actual and factual dependants, quality of information received from employer, level of investigation required by trustees, etc. Legally, a decision has to be reached and a resolution passed within 12 months of death, but it is normally done much faster than this.
Unapproved – is paid by insurer to the beneficiary(ies) after the required documents have been submitted to the insurer (claim form, death certificate, ID, beneficiary form, beneficiary ID, banking details, deceased’s pay slip) and this varies from insurer to insurer and can take 10 days up to two months.