Preservation funds
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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. • 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 subject to a SARS tax directive. • 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. |
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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 |
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.
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Prudential regulation |
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.
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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.
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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).
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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
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 R50,000.
What are our fees?
Our initial advice fee is 1.00% plus VAT.
Our annual advice fee is 0.80% 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 annual advice fee is 0.80% 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. |
Preservation Fund FAQs
Can I Withdraw Money From A Preservation Fund?
You are able to withdraw money from your preserved savings, however, you are currently only able to make one partial or full withdrawal, prior to the age of 55. This restriction is to encourage preservation of the fund, which allows for greater savings generation by the time of actual retirement.
Preservation Fund Withdrawal
While it is hugely beneficial to your savings and retirement outlook to not touch your preserved money before retirement, there may be financial reasons that leave you in need of withdrawing from your preserved savings early. However, before withdrawing early, it’s important to weigh up a few factors and alternate options.
Talk to a financial advisor before withdrawing. They may be able to advise you on another route to take that doesn’t involve early cashing in.
Cash in a small amount, rather than withdrawing a large chunk or the entirety of your retirement savings.
Consider the tax implications. If you withdraw prior to your retirement, only R27 000 is tax-free. Thereafter, you are subject to high average tax rates.
How Much Can I Withdraw From My Preservation Fund?
Prior to retirement, you can withdraw a partial or full amount from your preserved savings once. Upon retirement, you can withdraw a maximum of 1/3 cash once the balance of your savings exceeds R247 500.
I have reached 55 years of age. Can I Withdraw From A Preservation Fund?
After retirement or the age of 55, 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.
You are able to withdraw money from your preserved savings, however, you are currently only able to make one partial or full withdrawal, prior to the age of 55. This restriction is to encourage preservation of the fund, which allows for greater savings generation by the time of actual retirement.
Preservation Fund Withdrawal
While it is hugely beneficial to your savings and retirement outlook to not touch your preserved money before retirement, there may be financial reasons that leave you in need of withdrawing from your preserved savings early. However, before withdrawing early, it’s important to weigh up a few factors and alternate options.
Talk to a financial advisor before withdrawing. They may be able to advise you on another route to take that doesn’t involve early cashing in.
Cash in a small amount, rather than withdrawing a large chunk or the entirety of your retirement savings.
Consider the tax implications. If you withdraw prior to your retirement, only R27 000 is tax-free. Thereafter, you are subject to high average tax rates.
How Much Can I Withdraw From My Preservation Fund?
Prior to retirement, you can withdraw a partial or full amount from your preserved savings once. Upon retirement, you can withdraw a maximum of 1/3 cash once the balance of your savings exceeds R247 500.
I have reached 55 years of age. Can I Withdraw From A Preservation Fund?
After retirement or the age of 55, 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.