From 1 March 2021, provident fund members will no longer be able to take their total retirement savings as a lump-sum cash benefit on retirement.
Instead, it will be compulsory for provident fund members to buy an annuity at retirement with at least two-thirds of their accumulated savings – unless the total benefit is R247 000, or less.
The new requirements will be subject to the following conditions:
Provident fund members younger than 55 on 1 March 2021 ……
- Accumulated retirement savings on 1 March 2021 plus the growth on this money until retirement will be able to be taken as a lump sum cash benefit at retirement.
- Contributions made after 1 March 2021 – plus growth on this money – will be subject to the new rules; and two-thirds of this money will need to be used to buy an annuity on retirement. The member will only be able to take one-third of the money as a cash lump sum on retirement.
Provident fund members older than 55 on 1 March 2021 ……
These members will not be affected by this change at all if they stay a member of the same provident fund. This means that the retirement benefit will be treated in the same way as it is currently when these members retire. If these members transfer to another fund, after 1 March 2021, the following will apply:
- They will be able to take as a lump sum cash benefit at retirement their accumulated retirement savings plus the growth on the original provident fund on the effective date of the transfer to the new fund.
- Members will be required to buy an annuity with two-thirds of their retirement benefit on contributions, and growth on the new fund.