Preservation Funds

Resigned or Retrenched?

Preserve your pension money Tax Free.

Preservation funds are designed to act as a temporary warehouse for withdrawal benefits
from registered and approved pension or provident funds

Preservation Funds
A preservation fund is a pension or provident fund, which has been registered with Registrar of Pension funds and approved by the SARS.

• It is a fund in which employees, who leave the service of a participating employer owing to dismissal (including retrenchment) or resignation, or in the event of the dissolution of the employer’s pension or provident fund, may invest their accrued fund benefits.
• A member’s accrued benefit in a specific provident or pension fund may not be transferred to more than one preservation fund, but the benefits may be divided between a preservation fund and an RA fund.
• The following are retained (preserved) in a preservation fund until retirement:
  • Accrued retirement benefits
  • Completed years of service

Allowable transfers

• Only transfers from an employer’s pension fund or another preservation pension fund to the Preservation Pension Fund.
• Similarly only transfers from an employer’s provident fund or another preservation provident fund to the Preservation Provident Fund will be accepted.
• Benefits from a pension or provident fund may be transferred only when
  • an employee leaves the service of a participating employer owing to resignation, dismissal or retrenchment, or when
  • the pension or provident fund is dissolved completely.
• The member’s gross benefits in the transferring fund must be transferred to the preservation fund, except if the benefits have been reduced as a result of:
  − the provisions of Section 37D of the Pension Funds Act, e.g. a housing loan granted to the member by tent of a portion to a non-member in terms of a divorce order.
  A transfer to a preservation fund is prohibited if the gross benefits have been reduced for a reason other than those mentioned above.
• A transfer from a preservation fund to an RA fund is not allowed.
• Employees whose retirement provision structure changes from a pension fund to a provident fund will not be able to transfer accrued pension benefits to a preservation pension fund in the event of such restructuring, except if the pension fund in question is dissolved completely.
• A transfer between two preservation pension funds or two preservation provident funds respectively is allowed only if the employer of the member concerned is a participating employer in respect of the receiving preservation pension fund or preservation provident fund.
• Sometimes after funds have already been transferred, surplus money or interest out of the same pension or provident fund (therefore the same transferring fund) becomes available for a Preservation fund member. Such additional single premiums must be added to existing Preservation fund policies.
• The taxability of money resulting from contributions made prior to 1 March 1998 and those made after 1 March 1998 differ for members of pension or provident funds at local authorities. However, members can transfer their entire accrued retirement benefit (before and after 1 March 1998) to the Wealth Protector Preservation Funds. Only one policy will be issued. The transferring Fund must clearly indicate the tax-free portion (in respect of contributions prior to 1 March 1998) on the transfer form.

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