The design of the fund

The Political Office-Bearers Pension Fund is a Defined Contribution arrangement. Defined Contribution means that each month the Fund receives contributions from the State (as your “employer”) and from yourself. Your own contributions and part of the employer contributions are allocated for your retirement savings in the Fund. These contributions grow with the net investment returns (which may be positive or negative) earned by the Fund on its investments. The net investment returns are calculated by the Fund’s investment consultant on a monthly basis.

So, the amount that you will have available for your retirement will depend on two factors, namely:

• The contributions that have been set aside for you as retirement savings;
• Most importantly, the net investment returns the Fund earns on this money.

These contributions and investment returns are recorded in an account under your name. This is referred to as your FUND CREDIT.

WHAT IS THE “FUND CREDIT”?

The benefits of the Fund were revised with effect from 1 March 2016, as a result of significant changes to the tax regime for retirement funds that came into effect at that time. The current benefits are explained below. However, it is important to note that the intention of the 2016 benefit changes was that members present as at 29 February 2016 would not be adversely affected by this change and would not be worse off on a pre-tax basis when exiting the Fund at any time up to the 2019 Election. This is explained in detail elsewhere in this benefit guide.

NOTE: The Fund’s benefits are subject to review by the Independent Commission for the Remuneration of Public Office-Bearers, which will make recommendations to the President on this matter.

When you leave office and take benefits from the Fund, you will receive your FUND CREDIT. This is available to you as either a retirement benefit (if you are 50 or over) or a resignation benefit – the differences are discussed further below.

The Fund Credit is made up as follows:

• Your own contributions (7,5% of your monthly pensionable salary) made towards your retirement savings; plus
• The part of the employer contributions that is allocated directly towards your retirement – since 1 May 1999 this has been set at 17% of your monthly pensionable salary; plus
• Any amount that you may have chosen to transfer into the Fund from a previous retirement fund of which you were a member (e.g. a fund provided by your previous employer, before you became a political office-bearer); plus
• The net investment returns earned by the Fund on the investment of all these amounts.

Your pensionable salary is 60% of your total remuneration package.

Calculations as at 29 February 2016 were necessary for all members at that date, to determine what the opening balance of each member's FUND CREDIT was as at 1 March 2016. A detailed explanation of these calculations is provided elsewhere in this benefit guide.

WHAT ABOUT THE "TWO POTS" CHANGES W.E.F. SEPTEMBER 2024?

After 1 September 2024, your Fund Credit will be split into three components - three "pots":

• Whatever savings you had in the Fund on 31 August, minus the so-called "seed capital", will be your Vested Pot;
• One-third of all your new retirement savings from September onwards will go into your Savings Pot;
• Two-thirds of all your new retirement savings from September onwards will go into your Retirement Pot;
• Your Savings Pot will also be credited with 10% of your savings balance on 31 August (but capped at a maximum of R 30 000) - this "seed capital" is a transfer out of your Vested Pot to make sure that there is some money in your Savings Pot at the beginning of September.

As an example:

• Imagine that your remuneration package is R 1 200 000 per year, or R 100 000 per month.  Your pensionable salary is 60% of this, or R 60 000 per month.
• You first took office at the 2019 Election.  Your savings balance in the Fund (your Fund Credit) on 31 August 2024 was R 1 000 000.
• 10% of this is R 100 000.  But this is more than R 30 000, so the "seed capital" transfer to your Savings Pot is only R 30 000.
• So on 1 September 2024, your Vested Pot had a value of R 1 000 000 minus R 30 000, giving R 970 000.
• Your Savings Pot has been "seeded" with R 30 000, but on 1 September your Retirement Pot balance is still zero.
• Every month, the total contributions for retirement saving are 24.5% of your monthly pensionable salary (7.5% being the "member" contribution, and 17% being part of the "employer" contribution to the Fund).  24.5% of R 60 000 is R 14 700.
• So every month, one-third of R 14 700 (which is R 4 900) goes into your Savings Pot, and two-thirds (which is R 9 800) goes into your Retirement Pot.
• All three pots are invested in the same way and grow with the same investment return (growth %) every month.  (Remember that the "growth" in a particular month could be negative - a minus % - although on average over time, the "growth" is likely to be positive as one would hope!)

When you take benefits from the Fund, all three pots are affected, but in different ways - this is explained in other sections of this website.

If you bring in a benefit (a transfer value) from another retirement fund, after 1 September, it will also be split between the Vested Pot, Savings Pot and Retirement Pot - the other fund will advise the exact split.