Your payment options at Retirement
According to the rules of the Fund, the normal retirement age for all members is 65. You can retire from the age of 50, but it is important to note that any benefit payable prior to the age of 55 years will be taxed more harshly as per a resignation, in accordance with the relevant tax legislation.
Deferred Retirement: You do have the option to leave your benefit in the Fund when you retire, which is particularly relevant if retiring early. The money is preserved in the Fund and will accrue investment income (growth or negative return). This allows you to avoid making rushed investment decisions with tax implications by taking the cash lump sum immediately at retirement.
Please refer to the tax table below for a comparison between Resignation and Retirement.
Subject to your conditions of service, you may also be allowed to retire after the normal retirement age.
When you retire, your full member share becomes payable as a lump sum. It is important to have a retirement plan in place to ensure you don’t run out of money as a result of poor decision making. If you need assistance with your retirement planning, please contact our Retirement Benefit Counsellors on 0861 CRFUND (0861 273 863) to discuss the following options:
1) Default Annuity Option (In-Fund Pension):
Become an In-Fund pensioner and receive a life-long pension from the CRF. This option has not been available to CRF members since January 2016, but now they can again choose to receive a life-long pension from the Fund. Some points to be aware of:
- There is no limit on the amount that the member can convert to a pension. However, if it converts to a very low monthly pension, then the Fund’s appointed advisor on annuity strategies will contact the member to propose alternative options.
- The monthly pension will continue if the member dies within the first five years of receiving the monthly pension and will be paid to their qualifying spouse.
- If the member was married when they entered the In-Fund Pension and the member’s death occurs after the expiry of the five-year period, a spouse’s pension equal to 60% of the monthly pension at the time of the member’s death will be payable.
- If the member or their spouse (as a pensioner) die prior to the age of 80, a lump sum calculated by the actuary, could become payable, provided that the amount that was used to purchase the pension did not exceed the total pension that was paid to the pensioner already.
- The Trustees target an annual increase equal to 100% of inflation, but this is not guaranteed and is subject to the performance of the In-Fund Pension Portfolio.
- This is a life-long pension, but the pension amount is not guaranteed and can decrease in the event of continuous negative investment returns.
- The monthly pension will be paid on the 22nd of each month, or the preceding day if the 22nd falls on a Sunday or Public holiday.
If the member chooses to retire within the Fund and have their benefit converted to a life-long pension, the actuary will calculate their pension based on the following factors:
- The amount available for the In-Fund Pension (after the amount you have taken in cash).
- The member’s age. Even though the Fund allows for early retirement from age 50, the tax-free amount at retirement, currently R500 000, is only available from the age of 55.
- The age of the member’s spouse, if they are married. A spouse’s pension is compulsory if the member is married.
2) CRF In-Fund Living Annuity – the following criteria apply:
- The member must be 55 or older.
- The member can take a lump sum in cash before they transfer their benefit to the In-Fund Living Annuity, but you need to invest a minimum of R1million.
- Your monthly pension will be determined by the predetermined aged band-based drawdown rates.
- The monthly pension and drawdown rates can be adjusted annually on the pension anniversary date (the first of the month in which the member entered the In-Fund Living Annuity.
- The drawdown rate is the percentage that the member will withdraw from their investment on a monthly/annual basis.
- The member’s money will be invested in a maximum of four of the current investment portfolios available in the CRF.
- The same investment fees will apply as per when they were an active member of the Fund. This makes this one of the most cost-effective annuity options in the industry.
- Portfolium has been appointed by the Board of Trustees as financial advisors and it is compulsory for them to provide you with advice on the annuity options offered by the Fund. They will advise you when you should consider adjusting your monthly pension or drawdown amounts. They will also advise you on how to structure your investment portfolios.
- If the member passes away, their qualifying spouse or children will have the option to continue with a pension or withdraw the benefit as a cash lumpsum. Please note that in the case of the member’s death, Section 37C will apply. The member will be required to complete a beneficiary nomination form.
- Members will have the option to opt out of the In-fund living annuity and transfer their money to an external annuity. The pension is not guaranteed.
3) Out of Fund Living Annuity – the following criteria apply:
- This option can be considered by CRF members that are not suited to the previous options. This could be due to financial planning issues, or the fact that the In-Fund Living Annuity drawdown rates are not flexible enough.
- This alternative option was negotiated by the Fund to ensure that the best annuity cost structure remains available to our members out of the Fund.
- The member’s monthly pension will be determined by the drawdown rates selected by the member (2.5% – 17.5%).
- Members will have the option to adjust their drawdown rate annually on the pension anniversary date (the first of the month in which they entered the Annuity).
- Investment choice will be available to the member, and advice on investment choices will be provided by Portfolium, the Fund’s financial advisors.
- If the member passes away, the available fund value will become payable to the member’s beneficiaries.
Remember once again, the CRF has appointed Retirement Benefit Counsellors to explain the available options. Please call our call centre on 0861 CRFUND (0861 273863) should you need further assistance.