What benefit you will receive on retirement

At what age can I retire? 

In terms of the Fund Rules your normal retirement age is 65 unless your conditions of employment provide for a different retirement age. The earliest age at which you can retire is ten years before your normal retirement date with the consent of the Employer.

You may remain in service after your normal retirement age and retire at the later date as agreed upon between yourself and the employer.

What is my retirement benefit? 

Your retirement benefit is the amount of your accumulated retirement savings contributions plus investment returns (positive or negative). This amount is called your Member Individual Account. 

How can I receive my retirement benefit? 

The PetroSA Retirement Fund is a Provident Fund and because of this you can choose how much of your Member Individual Account must be paid to you as pension and/or a lump sum. If you want your entire benefit to be a lump sum, you must provide the Trustees with evidence that you have taken financial advice. 

Once you have received your retirement benefit, you leave the Fund. This means that you and your dependants have no further claim for benefits against the Fund. There is one exception to the above -you can elect to be paid a "living annuity" from the Fund. 

At retirement you thus face two important choices, namely:

  • How much of your benefit you should take in cash; and 
  • What type of pension you should receive in retirement.

These two issues are dealt with in the Section titled “Options available to you when you retire”.

Important Note:

Postponement of the annuitisation requirement until 1 March 2019 or until further notice

The following changes to the Tax laws were going to be introduced on 1 March 2016, but have now been subsequently been postponed to 1 March 2019*:

Your Fund is approved by SARS as a “PROVIDENT FUND” and under current legislation, when members retire they are permitted to draw their entire benefit as a cash lump sum if they so wish.

From 1 March 2019*, members of provident funds will only be able to draw up to a maximum of one-third of their total retirement benefit as a lump sum.  The remainder of the retirement benefit must be taken in the form of a pension payable for life.  Therefore, provident funds such as the PetroSA Retirement Fund will work the same as approved pension funds (which have always had the one-third restriction on lump sum retirement benefits). 

It is important to note that, accrued rights of existing provident fund members are protected.  For current members of provident funds as at 1 March 2019*:

  • Accumulated benefits at 1 March 2019*, together with investment returns up to date of retirement may be taken fully as cash lump sum on retirement.
  • Members aged 55 or older on 1 March 2019* may take their full retirement benefit as a cash lump sum irrespective of retirement date.  This includes benefits accumulated after 1 March 2019* in same provident fund of which they were a member on 1 March 2019*.

*Or until further notice. 

EARLY RETIREMENT

The Human Capital Division has been approached by a number of employees regarding early retirement and the benefits associated with it. For this reason it was decided to publish this communication that outlines the applicable rules, retirement benefits as well as the procedures that must be followed when applying for early retirement. 

1. RULES AND REGULATIONS

1.1 PetroSA Retirement Fund 

Paragraph 8.2.6 of the company’s policy on Terms and Conditions of Employment that deals with the Retirement Fund reads as follows: 

“The normal retirement age is 65. Employees may however apply for early retirement after reaching the age of 55. The Employer must approve such applications.” 

In line with the above policy, early retirement age is defined as follows in the rules of the PetroSA Retirement Fund: 

“A MEMBER may, with the consent of the EMPLOYER, retire at any time on or after the 10th (tenth) year before his or her NORMAL RETIREMENT DATE.” 

From the above it should be clear that any employee may retire from the age 55 onwards provided that PetroSA EXCO approves such applications. 

2. EARLY RETIREMENT BENEFITS

Should an employees’ application for early retirement be approved, the following benefits will apply:

2.1 Retirement Fund Benefits

An employee’s full Member Individual Account will become payable upon retirement. The Member Individual Account includes accumulated retirement fund contributions plus investment returns. The employee concerned can choose whether the benefit must be paid as a pension and/or a lump sum. The pension that the employee purchases must be from a registered insurer and must be on the following terms:

  • It shall be for the employee alone or, if married, for the joint live of the employee and his/her spouse. 
  • Once a pension has been purchased, the Retirement Fund will have no further liability to the employee and his/her dependants. The liability will rest with the selected insurer. 
  • The employee may select the type of annuity purchased and the choice of the registered insurer shall be agreed by the employee and the Board of Trustees of the Fund.

If an employee wants the entire benefit to be a lump sum, it shall be subject to such tax as applicable at the time.

DEFERRED RETIREMENT 

What IS Deferred Retirement?

This is when you retire from employment but elect to defer the payment and taxation of your retirement benefit until a later date. The option to defer the payment of a retirement benefit after retiring from employment has resulted from a recent amendment to the Income Tax Act (specifically an amendment to the definitions of Retirement and Retirement Interest in the Act). As this option has come about as a result of a change to the Income Tax Act, it applies to all retirement funds. 

The main purpose of the Amendment was to clarify the taxation of investment return between a member’s retirement date and the benefit payment date where previously the return was part of an individual’s interest income declaration and is now taxed as part of the fund benefit. 

Deferred Retirement is available on early and late retirement, i. e. a member can retire before normal retirement age (NRA) and elect to be paid out his/her benefit at a later date or could retire at or after NRA and elect the benefit at a later date. 

There is currently no maximum election age at which the benefit must be paid out but National Treasury is expected to prescribe a maximum age in due course. 

A partial Deferred Retirement is not permitted, i. e. the payment of the member’s full benefit (any cash portion and any annuity to be purchased) must be deferred until a later date if electing this option.