After months of toying with the idea of moving your retirement annuity fund from one product provider to another, you’ve decided to go ahead. You’ve done all necessary homework, compared fees, requested and scrutinised comparison reports and settled on a product provider that works for you. What now?
Enter Section 14
To transfer your retirement fund benefits from one product provider to another, you would need to do a Section 14 transfer. ‘Section 14’ refers to Section 14 of the Pension Funds Act. This allows an individual to transfer their current retirement savings fund—even if the fund’s rules say otherwise—to a new fund.
You can expect to provide the following documents to complete the transfer:
- A written request for withdrawal
- A transfer instruction
- A fund application instruction
You can request these forms through the product providers’ call centres or website. Your new retirement product provider will request the Section 14 transfer documents from your old product provider, request the actual transfer and, once the process is wrapped up, your new provider will issue you with a document confirming the transfer.
Terms and conditions
Minimum transfer amounts apply. Consult your new product provider for the minimum transfer amounts required.
As a member of a retirement annuity fund, you can only transfer to another retirement annuity fund. Retirement annuities’ pre-retirement withdrawal restrictions are, well, very restrictive. It only allows access to funds under very special circumstances. The Income Tax Act doesn’t allow the transfer of a retirement annuity fund to a fund that’s less restrictive.
Transfers and tax
From 1 March 2016, all transfers between approved funds are tax neutral. This means transfers from pension, pension preservation, provident or provident preservation funds to pension, pension preservation, provident or provident preservation and retirement annuity funds will not incur any tax liability. Transfers from a retirement annuity to another retirement annuity will also be tax-free.
Same street, different house
Canceling your agreement with your life-assurance RA provider can be quite expensive. We discussed the penalties involved when moving your retirement savings from a life-assurance RA to a different fund provider here.
An option is to stay with your current provider but to transfer your retirement savings to a new-generation retirement annuity offered by the same provider. Chances are you won’t have to pay a penalty (however, double-check this first) and you might get access to a loyalty bonus.
Reached your retirement date? You can still transfer
Changes to the Pension Funds Act in 2017 now allows the transfer of pension or provident fund savings to a retirement annuity after you’ve reached the retirement date.
Saving for retirement is the biggest investment most of us will ever make. Sadly, it can also be very complicated. In this monthly blog, we try to answer some of the retirement questions we hear most often, ranging from which products are best suited to different circumstances to efficient tax treatments. Words by Carina Jooste.