Are provident fund transfers restricted when changing jobs if you are under retirement age and the provident fund with the old employer is held by a third party such as Old Mutual?
Thank you for your question regarding your provident fund. When changing employers, you are permitted to move your provident fund from your previous employer’s pension or provident fund. However, before making a decision regarding the transfer, it is important to understand all the options available to you.
When changing employment, you essentially have the following choices to make regarding your provident fund:
- Firstly, you have the option to preserve your provident fund in a provident preservation fund. There are no tax implications for doing so, and you have the added benefit that a preservation fund permits one full or partial withdrawal to be made before age 55, subject to the retirement lump sum withdrawal tables. In choosing your preservation fund, you are free to make your own fund choices, although your investment strategy would need to be Regulation 28 compliant. Unfortunately, while a preservation fund allows you to preserve your retirement capital, it does not allow you to make additional contributions to the fund.
- Another option is to transfer the funds to an individual retirement annuity in your name. Once again, you would be able to choose your own Regulation 28 compliant fund in which to invest, with the added benefit that you can make additional contributions towards the investment on a monthly, quarterly, annual or ad hoc basis. The transfer of funds to a retirement annuity would not attract tax. Once transferred you will not be able to access your funds before age 55.
- You also have the option to withdraw your capital from the provident fund when leaving your employment, although bear in mind that you will be taxed as per the withdrawal tax tables below.
- You further have the option to defer the funds and leave them in your previous employer’s provident fund until your retirement.
- Then, lastly – as you have already mentioned – you can choose to transfer the funds to your new employer’s pension or provident fund.
Below please find the retirement withdrawal tax tables which would only apply should you choose to withdraw your capital, or make a withdrawal at a later stage from a preservation provident fund.
|Taxable income (R)||Rate of tax (R)|
|1 – 25 000||0%|
|25 001 – 660 000||18% of taxable income above 25 000|
|660 001 – 990 000||114 300 + 27% of taxable income above 660 000|
|990 001 and above||203 400 + 36% of taxable income above 990 000|