LCB009 10/2019 - Page 7 of 8
Most members leave funds through resignation, dismissal or retrenchment. The rules of the pension or provident fund set out in detail
the various options available to a member on termination of membership. The summary below is intended only to give a member an
overview of the various benefits and options to which the member may be entitled so that the member can make an informed choice
with regard to the benefits.
We strongly recommend that money accumulated for retirement should be preserved whenever possible. Experience shows
that once money allocated for retirement is taken in the form of cash, it is very rarely replaced at a later stage.
The following options are generally available:
• Option 1: Taking the benefit in cash
The implications of taking a cash benefit on withdrawal are that the tax-free amount (currently, R25 000, per life time, plus the
member’s own contribution not previously allowed as a deduction) has been exceeded, the remaining benefit will be subject to tax.
Clearly, a cash payment means that money set aside for retirement may be used for other purposes, resulting in the member
having insufficient funds to live on after retirement.
Lump sum withdrawals due to the member being retrenched or made redundant (voluntary or involuntary) are taxed in the same
manner as a retirement claim (currently, R500 000, per life time, plus the member’s own contributions not previously allowed as a
deduction). However, this tax relief is not available to a taxpayer who was, at any time, a director of the employer company and at
the time held more than 5% of the issued share capital or member’s interest in that company.
• Option 2: Transferring the benefit to a fund operated by the member’s new employer
It is usually possible to transfer the benefit to a fund operated by the member’s new employer. Not only will such a transfer be free
of tax (unless it is a pension to provident fund transfer) but the benefit will be held to the member’s credit under the member’s new
employer’s fund. Here it will earn investment income until such time the member retires or leaves the new fund.
Please note, if transferring to another fund/participating employer administered by Liberty Corporate and individual member choice
is allowed, the member must complete a new investment portfolio selection form.
• Option 3: Transferring the benefit to a retirement annuity or preservation plan
This option is similar to transferring the benefit to a fund operated by the member’s new employer described above, with the
difference being that the money is held in the member’s own individual investment plan.
In the case of a retirement annuity, up to one-third of the final amount accumulated can be taken at retirement in the form of cash,
subject to tax at that time. The balance of the proceeds must be taken in the form of a pension that will be subject to tax. Note that
the earliest age at which the member may retire from a retirement annuity is 55.
The difference between a preservation plan and a retirement annuity is that one withdrawal may be made from a preservation plan
prior to retirement (depending on accessibility) to meet any unexpected financial needs.
• Option 4: Death and disability benefit continuation option
Where this is offered, a member who has been on the fund for more than 12 months may, within 60 days of leaving service,
exercise an option to take out an individual policy without evidence of health. However, a Cotinine test may be required to confirm
smoker status. In this way the member can continue valuable life cover (and disability cover where applicable), at the member's
• Option 5: Preserving the benefit within the fund
When members leave their employer from 1 March 2019, they have the option to preserve their benefits within the fund. On this
option, no cash payment will be made to a member on withdrawal. Instead, their accumulated withdrawal and retirement savings
will continue to be invested inside the fund. Members of the Liberty Corporate Selection Umbrella Funds will be required to choose
their investment portfolio(s) into which their preservation benefits will be invested. This is done by completing Table 1 in Section 4
of this claim form. If no selection is made, the member's preservation benefits will be placed in one of the Default Investment
Portfolios selected by the Trustees of the Liberty Corporate Selection Umbrella Funds. The member can choose to change this
investment portfolio selection at a future date by completing an investment switch form. For members of other retirement funds, the
underlying investment portfolio will be the same investment portfolio that the member was invested in before becoming a preserver
member, or as guided by the Rules of the Fund. Whilst being a Deferred Retiree or Preserver Member in the Fund, the member
will continue to have access to investment portfolios at institutional rates. Depending on the investment portfolio selection, these
rates are typically lower than that of a preservation offering outside the Fund. When the member reaches retirement, the member
can ask for the Preserver Benefit to be paid out according to prevailing legislation and relevant pay-out options at that time.
Financial Advisory and Intermediary Services Act, No. 37 of 2002 ("FAIS")
The FAIS legislation was introduced for members' protection against the possibility of receiving inappropriate advice regarding their
financial needs. A member must ensure that their Financial Adviser is duly licensed under the FAIS Act and provides them with a
written record of the advice given to them. A member's Financial Adviser is obliged to fully disclose any material information pertaining
to the product, the product supplier and their relationship with the product supplier. In terms of this legislation, a member's Financial
Adviser must ensure that all the necessary steps have been taken to place the member in a position to make an informed decision in
respect of their withdrawal or retirement benefit.
Protection of Personal Information Act, No. 4 of 2013
We are required to share, collect and process your Personal Information (PI). Your PI is collected and processed by our staff,
representatives or sub-contractors and we make every effort to protect and secure your PI. You are entitled at any time to request
access to the information Liberty has collected, processed and shared. Errors and omissions are excluded.
The information contained in
this document does not constitute financial, tax, legal or accounting advice by Liberty.
Any legal, technical or product information contained in this document is subject to change from time to time. If there are any discrepancies
between this document and the contractual terms or, where applicable, any fund rules, the latter will prevail. Any recommendations made must
take into consideration your special needs and unique circumstances. Liberty Group Ltd is an Authorised Financial Services Provider in terms of
the FAIS Act (No. 2409). © Liberty Group Ltd. All rights reserved.