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2017-07-2112.978716.869115.1137

Q&A

Member’s FAQ

1. What is the difference between the Pension Funds and the Provident Fund?

The Provident Fund is a DEFINED CONTRIBUTION FUND. Under this type of scheme both the employers and members pay a fixed monthly contribution to the Fund. The ultimate benefit which a member or beneficiary receives is a lump sum based on the member’s own contributions, a percentage of his employer’s contributions and interest and profits credited to his account (Fund Credit)during the period of his membership.
Due to the fact that there is neither a pension nor post-retirement benefit payable to the member or his dependants the lump sum benefit under a Provident Fund is greater than that which pertains to a Pension Fund. To summarize, the Provident Fund pays benefits in the form of a lump sum, the amount of which is uncertain as it is determined by the investment returns of the fund and level of contributions. The Pension Funds, which are DEFINED BENEFIT FUNDS, make provision for the guaranteed payment of a lump sum, and pension and post-retirement benefit to a member and/or his dependants against the regular monthly contributions which the member and his employer make to the Fund. 

To summarize, the Provident Fund pays benefits in the form of a lump sum, the amount of which is uncertain as it is determined by the investment return of the fund and level of contributions. The pension funds however offer a guaranteed benefit in the form of a lump sum, pension and post-retirement payment.

2. What is the minimum age for entry into the Fund?

17 Years.

3. Am I obliged to join one of the NJMPF Funds?

Yes. It is a condition of employment that an employee elects to join the KwaZulu-Natal Joint Municipal Provident Fund. South African Local Government Association (SALGA) has recommended that all new appointments only be allowed to join the Defined Contribution Fund (Provident Fund) with an employer contribution of 18%. The Fund therefore suggests that all newly appointed employeers as a contractual term be placed on the highest contribution rate, as recommended by SALGA.

4. What is the maximum age for entry into the Fund?

57 Years. 
A person who has attained age 58 may elect to join the Fund provided that his employer is in agreement.

5. What is the pension age?

65 Years.

6. When will I receive a member certificate / proof of membership?

Within 3 months of becoming a member.

7. When does the Fund distribute Benefit Statements?

Benefit Statements are distributed annually to all the members of the Fund. Members can also request a Benefit Statement through the Fund’s Client Services Department. Through this website members can view or download their Benefit Statement.

8. What information is reflected on a Benefit Statement?

The Benefit Statements reflect what a member can expect to receive in the event of Resignation, Retirement, Ill-health and Death.

9. How long does it take to get a lump sum payment after exit?

The lump sum payment should be paid within 3 months after being exited by the employer.

10. Can I transfer between Funds?

Yes. There are two types of transfers:

  1. First Election
    If a member has joined the Fund prior to 01 June 1996, the member will have to notify the Fund and the employer before 31 December in order to transfer on 01 July the following year.
  2. Second Election
    These are members transferring for the second time or joined the Fund after 01 June 1996. They will have to give the Fund and the employer 12 months’ notice. This is to allow the municipality time to budget for the member. The Fund must be notified through written correspondence if a member wants to make a transfer. Formal written consent from the municipality to the Fund is required.

11. What are the effects on my benefit if I transfer between Funds?

Members should note that their benefit will be subject to tax when transferring from the Superannuation Fund & Retirement Fund to the Provident Fund. Therefore, members should carefully consider the investment objectives and risks, of each Fund before making a final decision. When members are transferring from the Provident Fund to the Superannuation Fund, the Fund Credit in the Provident Fund is used to purchase service in the Superannuation Fund. As a result, the Fund encourages members to obtain, through written communication, a quotation from the Fund before proceeding to transfer.

12. When can I transfer?

The member must complete 5 years in each Fund before they are eligible for transfer.

13. What is a Beneficiary Nomination Form?

This is where the member must indicate who of his or her dependents should receive benefits in the event of the member’s death.

14. How do I nominate beneficiaries?

Members can complete a Beneficiary Nomination Form with the beneficiaries’ full names, identity document numbers and state the relationship between them and the nominee.

15. How do I update my personal details?

A member must inform the Fund if there are any changes to their member status by completing a Beneficiary Nomination Form or through written correspondence. It is imperative that members review their status regularly and advise the Fund accordingly.

16. When should I go for a Medical Examination?

Within three months of commencing employment, the member must undergo a medical examination with the municipal appointed doctor. The exam will test the member’s medical fitness and an X-RAY will be required.

17. What happens if I don’t go for a Medical Examination?

Failing to undergo a medical examination will result in the restriction of a member’s benefit if he or she should die within ten years of service. Where the member has an existing illness, a full benefit may not be awarded in the event of death in relation to that illness should it occur within 10 years of service. If the member dies of unrelated causes, the restriction may not apply and a full benefit is payable.

18. Who submits the Medical certificate?

The member or the doctor can post the medical certificate back to the Fund; all member information is kept strictly confidential. After receiving the examination report, the Fund may write back to the member if any follow-ups are required.

19. Who pays for the Medical Examination?

The Fund and the employer will jointly bear the cost for this examination.

20. Can I take out a loan on my pension?

SECTION 19 OF THE PENSION FUND ACT- As a service to its members the Fund has made housing loans available to members of the Fund in accordance with Section 19 of the Pensions Fund Act for use solely to do the following:

  • To renovate/repair an existing dwelling
  • To buy land
  • To buy a house

The loan is granted to the member by an approved bank on condition that the Fund secures the loan by pledging up to a maximum of 50% of a member’s benefit as surety.

21. What is the loan procedure?

  1. The member undergoes a credit assessment by the bank to determine whether the member qualifies for the amount.
  2. The bank emails the loan verification form to the Client Services Administrator at the Fund.
  3. The Client Services Administrator will check the member data, assess loan amount applied for and complete bank form. The loan enquiry is recorded on the member’s record.
  4. The bank then submits the formal loan agreement with supporting documentation to the Fund.
  5. The Client Services Administrator checks that the amount on the document is the same as the original loan verification form. The loan details are then captured on the member’s record. The member has a choice of FNB, ITHALA and Standard bank.

22. What happens once I have received a loan?

The member will pay monthly installments to the bank until the loan amount is paid in full or a settlement is made upon a member’s exit from the Fund. Members must note that should they default on payments, the bank will call up the loan and their fund benefits will be reduced to pay up the loan.

23. What happens should I pass away or resign and I have not completed the loan payment?

Should the member pass away or resign before completing the payment of the loan, the Fund will pay the outstanding balance to the bank before paying the death or resignation benefit.

24. What are final average emoluments?

It is a member’s final average salary over a 12 month period.

25. What is contributory service?

Your contributory service is normally the period in respect of which you have contributed to the Fund i.e. from the date you entered the Fund until the date your service terminates, including whole months, but excluding portions of a month.

26. When must I join the Fund?

Your membership should be automatic and commences immediately when you start work.

Pensioner’s FAQ

1. What is the pension age?

65 Years. Members can go on early retirement if they are 55 years of age and have completed 10 years of service, however in the Retirement Fund based on when you joined the Fund the early retirement age may vary.

2. How do I update my personal details once I am a pensioner?

A member must send through a written notification to the Fund with his/her updated information. To change bank details the Fund will require the most recent bank statement from the Pensioner with a bank stamp along with the written correspondence.

3. Which Medical aids does the Fund use?

There are five approved medical aid schemes available to municipal workers in Kwa Zulu Natal. These are Keyhealth, Bonitas, HOSMED, L.A. Health and SAMWU Med. Should Pensioners decide to change schemes, written notification should be sent to the Fund via the municipality. Any changes to the scheme option or rate of contribution should be sent to the Fund by the end of November of each year to allow for processing before January of the following year.

4. Can the Fund assist with Medical Aid contributions when I become a pensioner?

This benefit applies to Superannuation and Retirement Funds pensioners only. The Fund can deduct the pensioners portion from his/her monthly pension and pay over to the medical aid scheme. The Fund does not calculate the apportionment however is advised by the medical aid scheme of the amounts.

5. How long does it take to get a lump sum payment after exit?

The lump sum payment may be paid within 3 months after being exited by the employer.

6. When do I receive my pension card or pension certificate?

A Pensioner receives a pension certificate on request and the pension cards are mailed within 3 months from commencement of pension.

7. When are the tax certificates distributed to pensioners?

IT3A and IRP5 tax certificates are mailed annually to pensioners.

8. What is the procedure for Declaration Forms?

The Declaration Form is mailed once a year on the month of a Pensioner’s birthday. The Form must be returned no later than a month after the Pensioner’s Birthday. Failure to do so will result in the suspension of the monthly pension. The completing of Form can also be done at the Fund’s office if you are in the area. The Fund will only accept the original Form, no copies, scanned documents, emails or faxes will be accepted.

9. What is contributory service?

Your contributory service is normally the period in respect of which you have contributed to the Fund i.e. from the date you entered the Fund until the date your services terminate, including whole months, but excluding portions of a month.

10. What are final average emoluments?

It is a member’s final average salary over a 12 month period

Retirement Reforms FAQ

1. What is Retirement Reform?

Retirement reform is a process whereby government, through policies, seeks to:

  • Encourage employees to save and provide adequately for retirement to ensure that they retire comfortably and have income that lasts for their lives during retirement.
  • Encourage employers to provide retirement saving plans for their employees as part of the employment contract.
  • Ensure that employees receive good value for money for their retirement savings and are treated fairly, and that their savings are prudently and diligently managed, and are kept informed of their retirement savings.
  • Improve standards of retirement fund governance, including trustee knowledge and conduct, and the protection of members’ interest.

2. How far is the Retirement Reform process?

Retirement reform is an ongoing process and will take some time to complete. The aim is to ensure that whatever reforms are undertaken do not result in unintended consequences. In this regard, it is also imperative to learn from other countries which are going through similar policy debates and reforms. Some critical aspects of the reform took effect in 2013 (e.g. enhancing governance through the Financial Services Laws General Amendment Act, No 45 of 2013), March 2014 (the increase in the tax free lump sum on retirement, as announced in the Minister’s Budget Speeches) and in March 2016, the equalisation of the tax treatment of contributions into retirement funds (i.e. Pension, Retirement Annuities and Provident Funds) will become effective.

3. How will the Retirement Reform benefit workers?

It is envisaged that workers will be encouraged to save (more) through Retirement Funds, and be able to provide for their own retirement and curb old-age poverty and excessive dependency on relatives and the Government. Members of Provident Funds will, similar to members of Pension and Retirement Annuity Funds, now be able to claim a tax deduction on their contributions to their funds, which has the potential to increase take home salaries. The 2013 enacted governance provisions will ensure that trustees of Retirement Funds manage the funds diligently and properly, and that employers will now be personally liable for failure to transfer collected retirement contributions into a pension fund.

4. What are the economic implications of Retirement Reform?

The National Development Plan acknowledges the importance of higher savings and investments in promoting economic growth in the country. These savings can come from domestic and/or foreign sources. Foreign savings are an important source for domestic investment but are short-term in nature and can be volatile, thereby affecting the Rand. Our domestic savings have generally been very low, and therefore need to be harnessed to better promote economic growth. At an individual level, retirees will increase their chances of a financially better life in retirement.

5. Where can I find information about the Retirement Reform?

Information can be obtained from the National Treasury’s website by following this link: http://www.treasury.gov.za/publications/RetirementReform/

6. Will I have access to my Pension or Provident Fund if I resign or lose my job before P-day?

Yes. This will only change when the preservation requirement becomes law. Vested rights (i.e. accumulated retirement savings before new laws take effect) will be protected and limited withdrawals will only be allowed on new contributions made after preservation becomes law.

7. Which reforms are related to Provident Funds?

Government is aligning the benefits of Provident Funds to those of Pension and Retirement Annuity Funds at retirement. This means that Provident Fund members will be required to convert at least two thirds of their retirement savings into an Annuity or Pension when they reach retirement, instead of a once-off large sum of cash. Further, members of Provident Funds will also enjoy the same tax deduction on their own contributions as currently applied to contributions by Pension Fund members, enabling them to potentially take home a slightly higher monthly salary. Vested rights are protected with the provident fund change (see below) The matter of annuitisation for Provident Fund contributions which was planned to become effective on 01 March 2016 has been postponed for 2 years.

8. When will the Provident Fund Reforms come into effect?

The matter of annuitisation for Provident Fund contributions which was planned to become effective on 01 March 2016 has been postponed for 2 years.

9. What is T-Day and has it come to effect?

T-day is the day when a new tax regime for retirement Funds is to be introduced. From that date most taxpayers will be able to deduct a higher amount in contributions from their income. T-day is also the day when the alignment of Provident and Pension Funds comes into effect. Effective date is 01 March 2016.

10. What are the comments surrounding the new legislation?

Vested rights are protected meaning that all contributions to your Provident Fund prior to the law becoming effective will not be affected by the changes.

11. What happens if I am a member of a Provident Fund and want to access my money upon resigning?

We encourage members of both pension and provident funds to preserve their savings. However, Provident members will be able to take all their retirement savings as a cash lump sum upon resignation (with tax implications), or to preserve it with a financial institution, or old or new employer.

12.Why is Government aligning Provident Fund benefits with those received from Pension and Retirement Annuity funds?

To help retirees from provident funds to better manage longevity risk (i.e. the risk of outliving your retirement savings when in retirement) and investment or volatility risk (the risk of up and down movements of market prices in securities), and prevent them from spending their retirement assets too quickly and becoming excessively reliant on the State or their families for support.

13. Will I be affected by the alignment if I am contributing to a Pension Fund?

No. There won’t be any changes for those retiring from Pension Funds. The Pension Fund status quo will remain in terms of the annuitisation requirement (i.e. getting a pension when one retires).

14. Do the Retirement Reforms affect me if I am a member of the Government Employees Pension Fund (GEPF), or other Government related Retirement Funds?

The GEPF is a Pension Fund; changes related to Provident Funds will therefore not affect members of the GEPF. However, given the introduction of a higher cap for tax deductions, members of the GEPF will now also be able to contribute more for retirement purposes.

15. Is Government going to take away or deny me access to my money?

No. There is no intention by Government to nationalise workers’ Pension/Provident Funds, or to prevent them from accessing their money. Instead, Government is proposing important measures to encourage workers to keep their savings until retirement, and to convert some of these funds into income at retirement. Workers should therefore not panic and resign to access their pension savings.

16. How do the Reforms affect me if I take Early Retirement or get disabled or die?

A person that takes Early Retirement, or gets disabled or dies will be paid out their retirement benefit as according to the rules of the fund they are contributing into.

17. What are prescribed assets and how do they affect my Pension Fund?

Prescribed assets mean that the Government authorises the investment of retirement savings into certain developmental assets. There are no prescribed assets in the South African retirement industry landscape. Regulation 28 of the Pension Funds Act regulates the maximum exposure of Retirement Funds to various assets. Government is of the view that Retirement Funds are sufficiently invested in infrastructure, through government and state owned company bonds, such that there is no need to prescribe how much each fund ought to invest in other assets of a developmental nature.

18. What is Preservation?

Preservation is when money saved for retirement through pension, Provident and Preservation funds remains in a retirement vehicle until the person retires, or is rolled over into another similar retirement savings vehicle without incurring taxes or penalties when a person changes jobs.

19. What is Government’s proposal on Preservation?

Government is proposing partial preservation only of new contributions that come into the retirement system after new legislation comes into effect. Limited withdrawals will be allowed and accumulated savings on date of implementation of legislation will not be affected.

20. Why is Government encouraging Preservation?

People tend to change jobs a number of times in their working lives. Every time an employee changes employment, they cash in their accumulated retirement savings, thereby retiring with insufficient retirement benefits. Cashing in before retirement also prematurely erodes security in old age, undermines the alleviation of chronic poverty and increases reliance on others.

21. Will Preservation affect all Retirement Funds?

Yes. Preservation will apply to all Provident and Pension Funds, with vested rights being protected (i.e. accumulated savings will not be subject to restricted withdrawal rules). Retirement annuity funds already have a preservation element in that policy holders cannot withdraw from the fund until they are 55 years old.

22. What is P-day?

P-day is the effective date for the implementation of preservation proposals. This date has not yet been decided on.

23. What does ‘protection of vested rights’ mean?

Protection of vested rights means that all accumulated retirement savings in retirement funds on the date of implementation of the preservation legislation will be subject to the current rules and 100% access to these savings will be allowed on resignation or withdrawal. Employees therefore, need not panic and resign in order to access the money that has been accumulated.