You may not access money you have saved in a retirement annuity (RA) fund before the age of 55, unless you emigrate or become permanently incapable of carrying out your occupation as a result of a disability of body or mind, two retirement fund members who complained to the acting Pension Funds Adjudicator (PFA) found out recently.
The acting adjudicator, Elmarie de la Rey, recently dismissed two complaints from pension fund members who wanted to access their retirement funds before the age of 55.
1. In the first case, the member wanted to withdraw funds from her retirement fund to further her studies. Veronique Burjins made a once-off payment of R62 878 with an option to make further contributions when she joined the South African Retirement Annuity Fund in July 2009. She is currently 31 years old. When Old Mutual, the fund’s administrator, declined her requests, Burjins complained to the PFA in November 2009. Burjins told the PFA that she does not want to borrow money if she can access the savings in her RA fund. In 2006, the Revenue Laws Amendment Act made it possible for members of an RA fund to withdraw from the fund and claim a cash withdrawal benefit if their fund value is R7 000 or less. However, Burjin’s fund value as at February 2010 was R65 190. Her complaint was dismissed.
2. In the second case, a fund member thought his savings were in a preservation fund when in fact he is invested in an RA. While no withdrawals are allowed from an RA before age 55, you are allowed to make one withdrawal from a preservation fund before retirement. This may be a partial or full withdrawal. Clinton Walsh complained to the PFA in February 2010 that his retirement savings had been placed in an RA rather than a preservation fund and, as a result, he was not able to withdraw his savings in October 2009. According to the ruling by the PFA, Walsh left his previous employer in May 2008 and decided to transfer his withdrawal benefit from the Optimum Pension Fund to a preservation fund administered by Momentum. However, Walsh told the PFA he did not read the policy document which was issued to him by Momentum. In October 2009 he wanted to make a withdrawal from the preservation fund and Momentum told him that he would not be able to do so because he was a member of the Momentum Retirement Annuity Fund.
Momentum told De la Rey that Walsh had not indicated on his application form what product his benefit should be invested in, although on the “recognition of transfer” form it was indicated that the money should be invested in a pension preservation fund. Momentum says it sent numerous queries to Walsh’s financial adviser regarding the type of fund he wanted to transfer his withdrawal benefit to and an application form dated May 19, 2009 indicated that the benefit should be invested in an RA fund.
Momentum then sent Walsh a contract which clearly showed that his savings were being transferred into an RA fund. Walsh also received quarterly statements showing that his money was invested in an RA fund. In January 2009, March 2009 and July 2009 he was told that he would only be able to make a cash withdrawal equal to one-third of his benefit on retirement.
In her ruling, De la Rey says despite receiving quarterly statements, Walsh did not question his membership until his request for a cash withdrawal was refused. “Walsh has not reached 55 years of age, he has not applied for an ill-health benefit, he is still alive, the Momentum Retirement Annuity Fund has not been wound up and Walsh has not emigrated. Therefore, he is not entitled to a withdrawal benefit at this stage,” she says. The complaint was dismissed.
- This article was first published in Personal Finance newspaper on 16 April 2011.