Statutory and Tax Provisions
How long does it take to transfer money to a Preservation fund?
A provident fund is a retirement benefit which differs from a pension fund in that at retirement the entire benefit may be taken as cash. No tax relief is allowable on member contributions.
Provident Funds are governed by the Pension Funds Act.
Pension Funds Act
Defines a pension fund organisation as any business carried on under a scheme or arrangement established to provide annuities or lump sum payments for persons who belong or belonged to that class of persons for whose benefit that scheme or arrangement has been established, when they reach their retirement dates or for dependents of such persons upon the death of those persons.
The fund must be permanent and bona fide. The rules of the fund must provide for the following:
- Annual contributions must be paid per specified scales.
- Membership is compulsory throughout employment for all eligible employees engaged after the date of inception of the scheme.
- Existing eligible employees must have the option of joining the scheme not later than 12 months after the commencement date.
- The scheme must be administered in such a way as to preclude the employer from controlling the management of assets or deriving any monetary advantage.
- Not more than one-third of the benefit at retirement may be commuted for cash except where the annual amount of the annuity is less than R 1800.
- All amendments to the rules must be notified to the Commissioner for Inland Revenue.