Retirement Annuity Funds are similar to pension funds, however the member can never access their retirement monies, until the reach early retirement age, which is age 55 (in terms of the Income Tax Act). Therefore, you will not be able to access your monies when you resign, you are dismissed or retrenched. A retirement annuity is a particularly useful tool to plan your retirement so speak to a financial advisor for more information or contact us if you would like to know more about Group Retirement Annuities.

A pension fund and provident fund are occupational retirement funds, provided by an Employer, and therefore membership is compulsory. The difference between the two funds are at retirement.

Pension Fund: When you retire, you can access 1/3 in cash and 2/3rds must be used to buy you an income (also called an annuity) for old age.

Provident Fund: When you retire, you can access the full amount in cash. However, please note that any portion taken in cash will be taxed.

A pension or provident fund allows you as a member of an Umbrella Fund to save a portion of monthly salary. This retirement monies will one day help you when you retire and stop working. The money you receive after retirement is called a pension and you need to speak to a registered financial advisor to guide you in the retirement process.

You should always aim to save enough to replace your working salary with a pension which covers a 100% of your salary received before you retired. 50% o 70% is seen a good pension replacement and anything upwards of 70% is seen as a great pension. If we take the above evidence, and I earned a salary of R10 000, the best solution would be to receive R10 000 after retirement, however a good pension would be R5 000 to R7 000 and a great would be an monthly amount above the R7 000. Therefore, if you earned R10 000 before retirement and you retire with a 70% replacement, you will receive R7 000 after retirement.

The amount you earn after retirement is dependent on your standard of living and how you spend money. Please speak to a registered financial advisor to assist you when you decide to retire.

When you contribute towards retirement, your annual income tax is lower due to saving for retirement.

Currently, your contribution is tax deductible up to 27.5% of remuneration, which is then subject to a maximum amount of R350 000 per year.

Some tips to make sure you retire comfortably:

  • While working, contribute towards your retirement – your future self will thank you;
  • Start as early as possible, compound interest is the 8th wonder of the world;
  • Try and contribute between 10% and 20% of your salary towards retirement on a monthly basis;
  • Aim to beat inflation to grow your retirement savings;
  • When you move between jobs, don’t access your retirement savings – any money accessed in cash is taxed by SARS;
  • Keep your debts low, and budget so that your income exceeds your expenses;
  • If you require financial advice, speak to a registered financial advisor.

If you want to contribute more towards your retirement, you can do it in the following ways:

  • Ask if your Employer provides flexible contribution rates for you to consider? You can then select to contribute more towards retirement; or
  • Ask if your Employer provides Additional Voluntary Contributions (AVCs) which allows members to additional contribute either lump-sum values once off, or to additionally contribute monthly.
If you would like to exercise any of the above options, please get in touch with your HR or Payroll Department to understand the requirements.

As a member of the Umbra Umbrella Arrangement, you will see the following fees paid:

Administration Fee | Investment Fee

You will either pay a flat administration fee, a combination of an administration and investment fee or just a clean administration fee. This is dependent on the size of your Fund, both in terms of membership and the size of assets.

Governance Fee

The Umbra Umbrella Arrangement makes provision for a governance fee, which is used to ensure that the expenses on the Fund are paid and covered. This fee is included in the above administration | investment fee, and is shown as a separate line item under costs. This fee is used to enhance our systems and communication to our members, including covering costs to the Regulator, being the Financial Sector Conduct Authority (FSCA).

Consulting Fee

Your Employer requires guidance in terms of making important decisions on your employee benefit structure at work and how to improve the outcomes for the staff in terms of contributing as much as possible towards retirement savings. This is where the appointed benefit consultant comes into play and this appointed service provider would assist the Employer to make these important decisions and how to implement them.

The consulting fee is deducted from the contributions paid by the Employer. It is an expense deducted against the Employer contribution portion. The fee is calculated in terms of the agreed ASISA fee scale, which is illustrated below:

ASISA Scale (VAT Excluded)
Percentage Charged
R0 – R200 000
7.5%
R200 001 – R300 000
5.0%
R300 001 – R600 000
3.0%
R600 001 – R2 000 000
2.0%
R2 000 001 upwards
1.0%

Risk Benefit Fee

You also pay a risk benefit fee for the risk benefits you enjoy under the Fund. Get in touch with your benefit consultant who can advise you on the cost of these benefits and what cover you enjoy. Ensure that you complete a nomination of beneficiary form, for your risk benefits and retirement monies when you pass away.

All your Fund information is available on the Umbra Web Portal.

You can also get in touch with the benefit consultant can assist you with this information.

Retirement Monies
=
Employer Contribution
+
Member Contribution
-
Consulting Fee
-
Administration Fee
-
Risk Premiums (Insurance Benefits)
+
Transfer in from other Retirement Funds
+/-
Net Investment Return

As a member of the Umbra Umbrella Arrangement, you are able to make use of the Umbra Web Portal here (Include Web Portal details). By using this Web-Portal, you are able to access all information regarding your retirement benefits.

You are encouraged to make use of the Web-Portal, as it allows you to upload your details and you can access your benefit statement and new member certificate directly from the Portal. Please look at your Member Booklet, which explains what you can do and how to access the Portal.

Please get in touch with your HR or Payroll Department who would also have access to the Umbra Web-Portal. Your Employer will be able to assist you with a benefit statement.

If you still experience any issues, please visit our website www.umbra.co.za for the contact details of all our staff who will be able to assist. Otherwise please click here to go to our contact form.

You can reach Umbra on our website www.umbra.co.za, or click on the contact form to get in touch, and we will assist you.

We provide a Fund Councillor and Financial Advisors to assist you. Below is a summary of what you as a member of the Umbra Umbrella Arrangement can expect:

Retirement Funds need to provide benefit counselling to all members on the Fund. The benefit counselling provides factual information, that is clear and understandable by members of the Fund, in terms of the options when a member withdraws or retires from the Umbra Funds.

The benefit counselling includes clear disclosure of all fees charged and the consequences of options being considered. Your governance fee makes provision for this counselling and we encourage all members to make use of this benefit, from an independently contracted benefit counselling provider.

The benefit counselling does not constitute any advice and is rather another communication tool for the Fund to guide, educate and empower our members to make more informed decisions, which will lead to better outcomes in the future. If you require financial advice or additional advice over and above the benefit counselling provided, please also get in touch.

Your retirement savings will be distributed in terms of Section 37C of the Pension Funds Act, which provides the Trustees with guidance on the distribution of a death benefit.

The Trustees in terms of Section 37C would ensure that dependent beneficiaries are not left destitute after the death of the main member. The following three guidelines can be followed in terms of Section 37C:

  • Attempt to trace and identify the dependants and nominees;
  • Distribute the benefit fairly and on an equitable basis; and
  • Determine the best mode for making payment of that benefit.

In terms of the Regulations to the Act, when a member changes Employers, their retirement savings become paid-up, and you are allowed to choose any of the options below:

Option
Taxable | No Tax Payable
Remain what is called a paid-up (deferred) member
No Tax Payable
Transfer to an approved Preservation Fund
(Option available in-house)
No Tax Payable
Transfer to a Retirement Annuity
No Tax Payable
Transfer to your new Employer
No Tax Payable
Part Cash, and part transfer
Taxable
Access full benefit in cash
Taxable

If you take any amount in cash, as mentioned, the following tax tables are used:

Withdrawal Tax Table:

Taxable Income (R)
Rate of Tax (R)
0 – 25 000
0% of taxable income
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

Retirement Tax Table:

Taxable Income (R) Rate of Tax (R)
0 – 500 000
0% of taxable income
500 001 – 700 000
18% of taxable income above 500 000
700 001 – 1 050 000
36 000 + 27% of taxable income above 700 000
1 050 001 and above
130 500 + 36% of taxable income above 1 050 000

When you reach retirement age, you are provided with the following options:

When you are not ready to retire, but you are no longer employed:

  • Defer your retirement and remain a member in the Umbra Umbrella Arrangement, and when you are ready to retire, get in touch
  • Transfer to an approved retirement annuity
  • Transfer to an approved preservation fund.
If you would like to take retirement, you could buy a pension (annuity):

Pension | Annuity Option Information
Living Annuity Allows you to invest your retirement savings in investment portfolios, and you choose the level of income you require monthly. You can draw an income between 2.5% and 17.5% of your retirement savings and is taxed in the same way your salary was taxed.

Choosing the rate of income, you get monthly is called the drawdown rate. You can change the investment portfolios you invest in annually and the drawdown rate previously picked, subject to the regulatory limits. If you deplete your retirement savings drawing down an income, then no further income will be available under the living annuity option. You can also leave the retirement savings for your beneficiaries.
Life Annuity When buying a Life Annuity, you give your retirement savings to an insurance provider, who commits to making a monthly payment of income to you for as long as you are alive.

You can leave the retirement savings to your spouse (buy this option onto the annuity), however you cannot leave this money to your beneficiaries.
Hybrid Annuity This option combines the flexibility of a living annuity with the security provided under a life annuity, and this is provided as consolidated income.

It allows you to invest a portion of your retirement savings into a living annuity and draw down an income when required, while the other portion is used to buy a life annuity (inside of the living annuity option).

The hybrid annuity enables you to reap the benefits of both types of annuities, and to manage the short-comings of each.

Your Employer must issue you as an employee of the company with an IRP5/IT3(a) certificate where remuneration is paid or has become payable to you. The IRP5/IT3(a) discloses the total employment remuneration earned for the year of assessment and total deductions.

Certificates are only issued for the full year 1 March to 28/29 February.

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