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You, as a member of an employer retirement fund, can now transfer your savings to a preservation fund or retirement annuity (RA) once you reach your retirement age but before you retire from the fund. Until now, you could transfer to an RA only.

Lize de la Harpe, legal adviser at Glacier by Sanlam, says that if a pension or provident fund member wanted to defer his or her retirement date after reaching normal retirement age, he or she could either remain a deferred retiree of the employer pension or provident fund or transfer the retirement interest benefit to an RA. She says this goes back to 2017, when the Income Tax Act was amended to allow for the RA option.

The amendments increased the choice of available retirement funds in cases where individuals decided to postpone retirement. Transfers to preservation funds, however, remained excluded for the fear that it could result in the withdrawal of the entire benefit as a lump sum, which is permitted in preservation funds but not in RA funds.

This has now been changed, says De la Harpe. The Taxation Laws Amendment Act of 2018, as published on January 17 this year, has extended this option to include preservation funds.

However, the once-off withdrawal option applicable to members of preservation funds will not apply to amounts transferred to such funds after reaching normal retirement age. For these amounts you would still need to use at least two-thirds to buy a pension when you do retire, as is the case with an RA. 

PERSONAL FINANCE