Can I take my pension if I migrate?
KARL ASKS:
I would like to know if I would be allowed to access or withdraw all my pension if I decide to emigrate to another country?
CITY PRESS REPLIES:
This will depend on whether you resign or retire from the fund and whether you have a company pension/provident fund or a retirement annuity.
On 1 March 2021 a new rule was introduced around financial emigration and accessing your retirement funds.
This affected members of retirement annuities, and those who are retiring, by restricting South Africans who have financially emigrated from withdrawing certain retirement funds until three consecutive years have passed.
After this three-year period, an individual will need to prove that they are a non-SA resident for tax and exchange control purposes.
EARLY WITHDRAWALS (PRIOR TO AGE 55):
. If you resign from your employer, you would be able to withdraw your retirement benefits as normal, although these will be taxed.
. Pension preservation fund / provident preservation fund members (with no prior withdrawals) are still able to access their retirement benefits, net of tax, and can transfer the funds abroad.
. Retirement annuity members wanting to access their funds need to financially emigrate before transferring the funds abroad. Their retirement funds will need to remain invested in South Africa for at least three years.
RETIREMENT (FROM AGE 55):
. Provident preservation fund members will be granted access to their full benefit, which can be taken abroad.
. Pension preservation fund / retirement annuity members can access up to one-third of the capital, which can be taken abroad.
Members wanting to access the full benefit will need to emigrate financially.
On emigration, the benefit will be subject to a higher tax rate.
Their retirement fund will possibly need to remain invested in South Africa for at least three years.
Will child maintenance affect my pension payout?
VINCENT ASKS:
I resigned at the end of March 2024. After I had resigned, I was served with a garnish order for child maintenance. Will this affect my pension payout from the Government Employees Pension Fund (GEPF)?
CITY PRESS REPLIES:
According to the GEPF, if the fund is still processing the resignation benefit, then the child maintenance claim (garnishee) will affect your pension payout.
READ: #MaintenanceMatters: Everything you need to know about child maintenance
However, if you had already received the pension payout then the court would have to instruct for the funds to be garnisheed from your bank account.
Is it worth investing small amounts
NJABULO ASKS:
Is it worthwhile to invest small change into shares on an app like Easy Equities from time to time? This may be the odd R50 to R100 on an exchange traded fund or even to invest in a company.
Does it make any tangible difference in the long term? I don’t think I could afford a structured or rigid investment plan now as I am on debt review until the end of 2025 and feeling the pinch.
CITY PRESS REPLIES:
You would be surprised how small amounts add up, but it is all about leaving the money to grow. Only invest money you will not need in the next five years or more.
If you are under debt review, a good strategy would be to build up an emergency fund first in a bank savings account.
This will provide some liquidity should you face an unexpected expense. You do not want to be in a position where you must sell your investments.
In the short term those investments can fall in value, and you may be forced to sell at a loss.
Easy Equity has a great, low-cost platform that allows for small value purchases. However, it is best to opt for something like an exchange traded fund (ETF) on the platform as that will give you a diversified exposure for a small amount of money.
Buying a single share is riskier as it all depends on how that single company performs. With an ETF you have better diversification, and you can even select one that invests offshore.
FNB has a great range of locally listed exchange-traded notes (ETNs) that track the performance of globally listed shares. You can invest in an ETN for as little as R10.
Another option is the Stash App which is zero-cost and accommodates small deposits into a tax-free savings account.
Can I settle my home loan with my prepaid funds?
MATOKGO ASKS:
Ihave had a home loan with FNB for 15 years. The outstanding balance is currently R70 000 and I have about R432 000 in my access account. Why can’t I just pay off my house with the money in my access account?
JUDY JANSE VAN VUUREN OF FNB HOME AND STRUCTURED LENDING REPLIES:
Your home loan is reduced and paid off by regular payments which are made up of principal debt (the amount originally borrowed) and interest over the loan term (the time that one has during which the loan is to be repaid).
For example, let’s assume a R10 500 repayment monthly, the breakdown of this repayment is a portion towards interest, and a portion towards the principal amount loaned, which will reduce over time.
Should you elect to pay R11 000 repayment, it means that you have paid R500 extra.
READ: Personal Finance | Home loan headaches: Here’s how banks decide how much money they will give you
This R500 will reduce your outstanding balance with the R500 and form what is known as prepaid funds (funds you have repaid in excess of your monthly repayment). Any prepaid funds reduce the outstanding balance, and by default, because your balance is lower, the amount of interest is lower as you are charged interest on the outstanding balance.
As a result of the R500 immediately reducing your outstanding balance, should you choose to access these funds, it means you are taking out the funds you paid in advance, and thereby increasing the balance with the amount you withdraw.
The loan will be recalculated if you withdraw to ensure you repay the outstanding balance within the remaining term.
In the example provided above, your outstanding loan balance is R70 000, and you have R432 000 available to access. That is effectively a line of credit that is available to you.
If you access the R432 000, you are withdrawing the amount that has been repaid and your balance will go up to R502 000 (R70 000 outstanding balance + R432 000 prepaid funds you have access).
Must a legal guardian provide proof of expenses?
DAYA ASKS:
If a legal guardian makes a claim from a beneficiary trust must the guardian submit his or her payslips as well as income and expenditure? How would the fund trustees know whether the guardian is being responsible or reckless in financial matters?
DAVID HURFORD, THE CHIEF EXECUTIVE OFFICERAT FAIRHEADS REPLIES:
Typically, the beneficiary fund trustees do not perform an assessment on the guardian or caregiver’s competence to manage money appropriately. This is the job of the retirement fund trustees as part of their Section 37c deliberations when deciding on an appropriate mode of payment to a minor dependent of a deceased retirement fund member.
Once the benefit is placed in the beneficiary fund, the primary objective of the fund is to ensure that the benefit is used in the interests of the child. The beneficiary fund should work closely with the guardian to make sure that the money is used to help the child through their formative years.
Benefits can be distributed from the beneficiary fund in three ways:
. A regular income which can be paid to the guardian or caregiver on a monthly basis (or the frequency decided upon by the guardian);
. Ad hoc capital requests; and
. The final termination benefit which is paid to the member (child) when they reach the age of majority, or some other date as determined by the board of trustees.
The regular income payments are typically structured to cover the daily living expenses of the child.
How the money is used by the guardian is not controlled, and therefore these payments are relatively small with larger amounts being paid upon request.
Ad hoc capital requests are assessed and verified, and in most cases paid directly to the service provider (such as a school for school fees).
In some cases, a guardian may request that the regular income be increased due to a change in their circumstances. The beneficiary fund trustees may request information about the household income and expenses to assess whether it would be in the interest of the minor to increase the regular income, or whether the increase would be used to fund items from which the member would not benefit.
In conclusion, there are occasions where the beneficiary fund may request information from the guardian in order to have a more wholistic view of the financial circumstances of the household in which the child lives.
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