Q&A

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.

17 Years.

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.

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

65 Years.

Within 3 months of becoming a member.

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.

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

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

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.

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.

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

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

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

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.

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.

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

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.

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

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.

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.

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.

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.

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

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

From 1 March 2021, the Taxation laws Amendment Bill (T-Day) officially came into effect. As part of the retirement reform initiatives and a push to help provident fund members secure an income at retirement, government will now be treating provident funds more like pension and retirement annuity funds. Provident fund members will now be required to use two thirds of their retirement savings to purchase an annuity and claim up to the remaining one third of their benefit as a lump-sum.

• This legislation will only affect retiring provident fund members,
• The annuitisation rules do not apply where the retirement benefit does not exceed R247,500,
• All amounts contributed before 1 March 2021 will be vested with the members and available, with growth, to members.
• The main objective of this change in this legislation is to protect retirement savings and help individuals plan better for their futures.

• Provident fund members who are under the age 55 on 1 March 2021, will still be permitted to take lump sum amounts on retirement as long as these accrued before T-Day. This is referred to, as “vested benefits”.
• Amounts that are subject to annuitisation will be termed “non-vested benefits”.
• Members over age 55 on T-Day will not be subject to annuitisation.

The aim is to enable members to make informed decisions at critical stages of their working lives through accessible and easy-to-understand financial information regarding their benefits. Members have access to Retirement Benefit Counselling through our interactive website www.njmpf.co.za in both English and in isiZulu, mobile app and our Client Services section on (031) 279 5300 or info@njmpf.co.za.

When a member is dismissed, retrenched or resigns, they automatically become Paid Up members, up until they give the Fund instructions to cash out or transfer their benefit. Paid up members remain within the Fund and earn returns on their benefits.

In a case of retrenchment, resignation or dismissal – the Fund understands the temptation members may have of taking their retirement savings as a lump sum and spending it, instead of preserving it for a later date when they retire. Before deciding, it is important to consider all your options.

Option 1 – Cash Withdrawal

A member may opt to have their benefit paid in cash which will be paid to their bank account. (Once a

tax directive has been received from SARS and is processed.)

Alternatively

• Purchase a preservation product from a provider of your choice.
• Purchase an annuity from a provider of your choice.

In this context, an annuity is created when you retire. NJMPF provides you with an opportunity to use your lump sum benefit to buy an annuity which provides you with a pension payable monthly (or at other intervals) during your retirement years.

The Fund offers an in-fund living annuity which features very low administration and investment fees.

A provident fund is the same as a pension fund, but prior to 1 March 2021, it differed in that when you resigned or retired, you could take the entire sum as cash, which you’d be taxed on. You wouldn’t need to purchase an annuity. With the retirement reforms introduced from 1 March 2021, provident funds are now more similar to pension funds, and the following now applies:

• Fund members are required to take a third of the benefit as a lump sum.
• They must use the remaining two thirds to buy a pension that provides a monthly income.

As these Funds are Defined Benefit Funds, you automatically become an NJMPF Pensioner and are paid a monthly pension for life when you retire.

NJMPF members are advised that this information does not constitute financial or tax advice. We strongly recommend that you seek the advice of a certified financial planner to assist you in this process.