Preservation funds

A preservation fund is a tax-efficient solution that will help you preserve what you’ve already saved for retirement. It’s also designed to grow the value of your savings until you retire.

A Preservation fund is suitable for anyone leaving an employer as a result of resignation, dismissal, retrenchment or if the pension or provident fund is wound up, and who wishes to preserve the benefits of their pension or provident fund membership with their previous employer until retirement.

Pension and Provident Preservation Funds offer a wide range of investment options that you can choose to invest in.

•  At termination of your membership with your employer’s pension or provident fund, the benefits in your fund can be transferred to a pension preservation fund or a provident preservation fund respectively. Pension preservation plans accept pension fund benefits, while provident fund benefits may be invested in the Provident Preservation plans.

•  If you choose to invest in the preservation plans, you will apply to become a member of the Pension preservation Fund or the Provident Preservation Fund.

•  Your benefit in the appropriate preservation fund cannot be ceded, transferred, assigned, reduced, hypothecated or pledged and
is subject to the provisions of the Pension Funds Act (No. 24 of 1956). You are therefore not allowed to use the benefit or right to the benefit as security or to transfer it to someone else or to make it over to a third party. Your creditors cannot attach the benefit or right
to the benefit.

•  Membership in the preservation fund will only be confirmed if a life insurance company, acting as the fund’s appointed administrator,has confirmed to you in writing that your application for membership has been accepted, and that your contribution has been received.

•  No tax is payable on the money transferred in this manner and no tax is payable on the investment growth earned (March 2015).

•  The preservation funds allow a single withdrawal of any portion of the investment in the fund prior to your retirement. If any
withdrawals had ever been taken previously, then no future withdrawals will be allowed. A portion of this withdrawal is tax free
according to current tax practice (March 2015).

•  The fund rules provide that, at your selected retirement age, your investment amount in the preservation fund accrues to you.
This comprises your contribution plus or minus any investment returns and minus all fees that have been levied.

•  If you have invested in a pension preservation fund then, at your selected retirement age, a maximum of one third of the investment fund can be taken as a lump sum withdrawal while a minimum of two thirds must be used to purchase an annuity from a registered insurer.

•  If you have invested in a provident preservation fund then your full investment fund can be taken as a cash lump sum while any
contribution to a pension-providing vehicle such as a linked annuity is voluntary.

•  Tax in accordance with the applicable tax rules and rates, as determined by the South African Revenue Service, will be applied on any lump sum and annuity payments. The income received from the annuities will be taxable as gross income in terms of the Income Tax Act.

•  No recurring contributions may be made to a pension preservation fund or a provident preservation fund.

What are the benefits of investing in a preservation fund?

Tax efficiency

All your investment growth, including interest, dividends and capital gains within a retirement annuity is tax free.

At retirement age, you may withdraw a portion of your preservation fund account tax free.

Investment choice

Prudential regulation

You have access to a range of unit trusts designed to enable you to select one or more underlying unit trust funds to suit your risk profile.

All investment portfolios you select are compliant with Regulation 28 of the Pension Funds Act, to ensure your money is invested prudently across a number of asset classes.

Discipline, flexibility and freedom

You can only cash in your preservation fund at retirement. However, the preservation funds allow a single withdrawal of any portion of the investment in the fund prior to your retirement. If any
withdrawals had ever been taken previously, then no future withdrawals will be allowed. You have flexibility in that you may switch between the unit trusts at any time without any penalties, and if you change jobs, your preservation fund continues without any need to transfer. You may, at any time, transfer your investment to any other approved preservation fund, without cost or penalty.

Transparent fees and regular reporting

All fees are fully disclosed and we will keep you regularly informed on all aspects of your investment. You may also access your investment information online.

Transfer of wealth

You may nominate a beneficiary on your preservation fund. In the event of your death, the money in your preservation fund account is paid out to your beneficiary, and you do not incur any estate duty (a form of tax).

Who should consider investing in a preservation fund?

You may wish to consider investing if:

you are leaving an employer as a result of resignation, dismissal, retrenchment or if the pension or provident fund is wound up
you wish to preserve the benefits of your pension or provident fund membership with your previous employer until retirement.
you wish to save for retirement in a tax-efficient way

What are the minimum investments?

The minimum once-off lump sum investment is R20,000.

What are our fees?

Our initial advice fee is 1.00% plus VAT.
Our annual advice fee is 1.00% plus VAT, deducted monthly from your preservation fund account.

For clients with investment portfolio greater than R3 million, our fees are negotiable on a sliding scale. 

Our product providers

Allan Gray, Discovery, Glacier, itransact, Liberty, Momentum, Old Mutual, Sanlam, Stanlib

Our Preferred providers

Allan Gray

We select Allan Gray as our preferred provider for the following reasons:

1. Reputable asset management company; 2. Financially sound; 3. Efficient administration platform; 4. Clever use of technology delivers excellent user interface; 5. Excellent staff delivers excellent client service; 6. Low platform administration cost; 7. Select range of good performing unit trusts; 8. Easily creates customisable, informative investment overview; 9. Enables clients to submit instructions online.

Discovery Invest

1. Reputable financial services group; 2. Financially sound; 3. Easily creates detailed investment proposal; 4. A wide range of internal and external funds; 5. Clever use of technology to provide excellent client service; 6. Costs are competitive.