• Intro
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• Retirement Annuities
• Preservation Funds

General Rules of Preservation Funds

When you resign from your employer's occupational fund, you can transfer the assets in the fund to a preservation fund. No tax is payable on this transfer. If the rules of the preservation fund allow, you can make one withdrawal (which will be taxed at your marginal rate) from your savings fund retirement.

No ongoing contributions can be made to a preservation fund. If you build up a second lump sum with a second employer, you would be obliged to invest in a second preservation fund.

When you transfer your assets to a preservation fund, a portion of the pension fund from your current employer can be transferred to a retirement annuity fund, with the remainder being transferred to a pension preservation fund, subject to the rules of your pension or provident fund.

However, remember if you are transferring from a provident fund to a retirement annuity fund, your freedom to take the full benefits in cash at retirement will be lost. No transfer from a preservation fund to a retirement annuity fund is allowed.

Cessions, Loans and Protection from Creditors

You may not cede your investment in a Preservation Fund, use it for security for a personal debt or take a loan from the fund. Any funds in a Preservation Fund are protected from creditors, as specified by the Pension Funds Act.

Tax Implications

You are not taxed when investing in a preservation fund (the money is transferred from your existing retirement fund with no tax consequences.) During the course of the investment the fund administrators will pay the legislated retirement fund tax on income it receives from its assets within the fund. No capital gains tax is payable on the growth of assets within the fund.

Withdrawals and Death Benefits

Pension and Provident Funds differ in respect of the cash withdrawals that can take place on your retirement or death. These are detailed below. In both types of fund, a portion of the amount taken as cash is tax free, with the balance being taxed according to a formula based on your average tax rate. At your death your dependants and not necessarily your nominated beneficiaries have the first right to the benefits of your Pension Preservation Fund.

What's the difference between a Pension and a Provident Preservation Fund?

The Preservation Fund version that you can move your retirement savings into depends on the type of retirement fund that the have come from. If your retirement savings are currently in a Pension fund then they may only be moved into a Pension Preservation Fund, and likewise for a Provident Fund. Than main differences are as follows: