The fund has previously communicated on the retirement reform changes that will come into effect on 1 March 2021. These changes were initially meant to be implemented on 1 March 2015 but were postponed to 1 March 2021 to get an agreement between all stakeholders, including stakeholders at NEDLAC level.
These reform changes aim to encourage greater savings towards retirement to relieve the reliance on state pension after retirement, whilst creating a uniform retirement fund system for all types of retirement savings vehicles, such as pension, provident and retirement annuity funds. The changes aim to provide members of different retirement funds with the same tax and benefit payment treatment.
What are the changes?
BEFORE 1 MARCH 2021, provident fund members could take their retirement benefit as a full cash lump sum and were not required to buy a pension (annuity) from a registered insurer when they retired. Pension fund members must use at least two-thirds of their retirement benefit to buy a pension unless the total benefit is less than R247 500.
FROM 1 MARCH 2021, retirement benefits from provident funds will be treated in the same way as pension funds. The changes mean that members will have to buy a pension (living or life annuity) from a registered insurer with at least two-thirds of their retirement benefit unless the total benefit is R247 500 or less.
How will these reform changes affect you?
The reform changes will have no impact on the payment of a resignation benefit. The benefit is still payable as a cash lump sum, if you end service before age 55.
If you are a Category C and/or A member and you are 55 years and older on 1 March 2021, the reform changes will not affect you, you will have the option to have the full retirement benefit paid to you as a lump sum (as long as you remain a member of the NFMW until you retire).
If you are a Category C and/or A member and you are younger than 55 years on 1 March 2021. You can still choose to have your benefits accumulated before 1 March 2021 plus interest on that benefit, paid as a cash lump sum, when you retire. However, only one-third of the benefit accumulated after 1 March 2021 can be paid as a cash lump sum and two-thirds must be used to buy a pension. If the benefit accumulated after 1 March 2021 is less than R247 500, you can choose to be paid the total/full benefit as cash lump sum.
If you are a Category E member. Nothing changes.
These reform changes are explained in the Newsflash, retirement reform brochure and video available below:
Retirement reform brochure
Retirement reform video
Do you not feel like reading? Watch the video on the reform changes by clicking here.