Starting a retirement fund for employees - Pension Fund or Provident Fund
The government is forcing employers to start pension funds, as it does not want people to take the full amount out at retirement. Instead it would like retirees to have a regular pension. We list the main factors influencing the choice between a pension and provident fund.
The objective of a pension fund is to provide employees with a regular pension in retirement. Pension fund members must buy an annuity with at least two-thirds of their retirement fund.
The objective of a provident fund is to provide employees with a lump sum benefit at retirement. A provident fund is thus more flexible, as employees can still purchase an annuity with their fund.
From 1 March 2016, the maximum permissible tax free deductible contributions to pension and provident funds have been standardised. Employers can deduct unlimited contributions to their employees’ pension or provident fund. These contributions attract fringe benefits tax that must be recovered from the employee. The employee can, in turn, deduct all contributions (employer and employee contributions) up at 27.5% of gross remuneration or taxable income (whichever is the higher), subject to an annual cap of R350,000.
Our Retirement fund consulting services
We offer the following retirement fund consulting services:
- Independent research and advice
- Comparative quotes
- Arrange presentations by providers
- Implement retirement fund solution. This consists of group presentations, as well as individual face to face financial planning sessions.
- Ongoing advice and service. This includes:
Dedicated internal consultant
New services and products
Member admin and claim queries
Annual member benefit statements
Annual members’ presentation
Voluntary individual member financial planning reviews
Review of product providers as necessary.
Our product providers
We make use of the following reputable companies in sourcing quotes and constructing solutions for our clients:
Momentum Funds At Work
Old Mutual Corporate
Sanlam Employee Benefits: Sanlam produces an annual, industry-leading research paper on the retirement fund industry, you may find it here: https://www.sanlam.co.za/institutional/retirement/benchmarksurvey/Pages/default.aspx/
How can we help
Further reading: Retirement funds - Your rights