When you exit the Fund due to resignation, retirement, dismissal, or retrenchment, your full member share becomes payable as a lump sum.
Your benefit is made up of your contributions, plus the employer’s contributions, plus all investment returns, minus the amount you pay towards risk cover and the percentage that is deducted for the running costs of the Fund.
On leaving the Fund, it is very important to remember that the main purpose of retirement funding is to provide you with a sustained regular income when you retire one day. It is therefore vital to consider the pros and cons of taking a cash lump sum when leaving your employment prior to retirement age. There are tax implications on lump sum withdrawals as shown in the table below:
|Lump sum tax deduction table at Resignation||Lump sum tax deduction table at Retirement|
|Resignation Benefit||Tax rate applied||Retirement Benefit||Tax rate applied|
|R0 – R25 000||Tax free||R0 – R500 000||Tax Free|
|R25 001 – R660 000||18%||R500 001 – R700 000||18%|
|R660 001 – R990 000||27%||R700 001 – R1 050 000||27%|
|R990 001 and more||36%||R1 050 001 and more||36%|
The Fund actively encourages members to preserve their retirement savings when exiting the Fund before retirement age, by considering one of the following preservation options:
Become a deferred member: This option allows you to leave your resignation or retrenchment benefit in the Fund when you leave service. The money is preserved in the Fund and investment returns will be allocated each month (positive or negative returns).
Transfer your benefit to a provident preservation fund: You may transfer your money to a provident preservation fund to provide for retirement. You could be able to make a one-off withdrawal depending on the rules of the preservation fund that you choose.
Transfer to a retirement annuity: you will be preserving your benefit for retirement.
Remember that the Fund has appointed Efficient Wealth to provide members with financial advice. Please make sure you contact them to assist you in making the right choices and helping you to retire comfortably one day.
Retirement Benefit Options
According to the rules of the Fund, the normal retirement age for all members is 60. You can however retire earlier, from the age of 50. However, it is important to note that any benefit payable prior to the age of 55 years will be taxed in accordance with the withdrawal tax tables of the applicable tax legislation. You are also allowed to retire after normal retirement age subject to your conditions of service.
Remember 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 due to 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 payment options:
You have the option of leaving your benefit in the Fund when you retire. The money is preserved in the Fund and will accrue with investment income (growth or negative return). This takes pressure off the member of having to make investment decisions with tax implications if a cash lump sum is taken at retirement.
The trustees have amended the rules to allow members to keep their money with the CRF when they retire.
Default Annuity Option: In-Fund Pension Option (pending Rule Amendment approval)
CRF members have the option to 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.
- 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) pass away 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.
Alternative Annuity Options:
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 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 draw down 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 on the Fund’s annuity options 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.
Out of Fund living annuity
This option can be considered by CRF members that are not suited to the Fund’s In-Fund Pension or In-Fund Living Annuity Options. This could be because of 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 dedicated advisors on the Fund’s annuity options.
- If the member passes away, the available fund value will become payable to the member’s beneficiaries.
Remember, the CRF has appointed Retirement Benefit Counsellors to explain the available options. Please call our call centre on 0861 CRFUND (273863) should you need further advice.