The resignation options

Cash option (restricted as from September 2024)

• Your resignation benefit (up to the maximum portion of your Fund Credit which you are allowed to take in cash) is payable immediately, and is subject to tax (see the section of this guide titled “Taxation of benefits”).  See the page titled "What benefits you will receive on resignation" for an explanation of what you can and cannot take in cash, as a resignation benefit.
• You have complete flexibility in deciding how you wish to use your after-tax resignation benefit.
• However, you must remember that if you don't set this money aside for your retirement, you will have less money available when you finally retire. The reality is that many people retire with inadequate savings because they have not left their resignation benefits for retirement.
• You can choose to take part of your benefit in cash (up to the maximum allowable cash - subject to tax) and preserve or transfer all the rest - see below.

Transfer your benefit to another Fund

Preservation Fund

You can transfer your resignation benefit (your Fund Credit) to a Preservation Fund, usually provided by a financial services company (e.g. an insurance company).  We recommend that you take advice from a reputable licensed financial advisor before going this route.

• In this case no tax is payable until you receive a benefit from the Preservation Fund.  When you reach retirement, the same rules will apply (as in the POBPF) to determine the maximum cash lump sum that you are allowed take (subject to tax), with the balance being used to provide you with a pension.
• If you take a benefit from the Preservation Fund before retirement, it will be taxed as a resignation benefit.  Again, the same rules will apply (as in the POBPF) to determine the maximum cash lump sum that you are allowed take (subject to tax).  You should note that Preservation Funds generally have a minimum retirement age of 55 (not 50 as in the Political Office-Bearers Pension Fund).
• Any benefit you receive at retirement (after 55) will be taxed as part of your retirement benefits (cash or pension).
• An advantage of a Preservation Fund is that you may make one cash withdrawal (up to the permitted maximum) before your retirement.  Once you have made such a withdrawal, the balance of your money must be left in the Preservation Fund until you retire. As noted above, this cash withdrawal will be taxed as a resignation benefit.
• You can transfer from one Preservation Fund to another, but there are costs involved.
• The main disadvantage of this option is that your costs are very likely to be higher compared to leaving your money in the Political Office-Bearers Pension Fund. You could pay commission at entry, and the ongoing administration fees could be as high as 0.5% per annum of the market value of your savings in the Preservation Fund. The investment management fees could also be as high as 1.5% per annum of the market value of your savings in the Preservation Fund – currently the investment management fees paid by the Political Office-Bearers Pension Fund average about 0.65% per annum. You (or your advisor) will also need to monitor on an ongoing basis the performance of the investment managers with whom your money is invested in the Preservation Fund.

Points to note:

• If you choose to take any part of your resignation benefit in cash prior to your retirement, you reduce the amount you have for your retirement. This may result in you not having sufficient money in your retirement.
• If you choose to invest your money in a Preservation Fund, make sure that you get full details of the commission, ongoing administration fees and investment fees. An additional cost of say 1% per annum over 20 years will reduce your retirement benefit by as much as 20%!

Retirement Annuity Fund

Retirement Annuity Funds are somewhat similar to Preservation Funds and are also provided by financial services companies such as insurers.  Again, we recommend that you take suitable financial advice before going this route.

• You will not pay any tax at the time you transfer the money, and you will be preserving your benefit for your retirement.
• Importantly, you can only receive a benefit from a Retirement Annuity Fund on your retirement on or after age 55 (or on your earlier death or ill-health retirement) – you cannot access your savings in the Retirement Annuity Fund before this.
• When you reach retirement, the same rules will apply (as in the POBPF) to determine the maximum cash lump sum that you are allowed take (subject to tax), with the balance being used to provide you with a pension.
• You should also be aware that the cost structure of a retirement annuity will be higher than becoming a deferred beneficiary of the Political Office-Bearers Pension Fund.

New employer’s Retirement Fund

As from 1 March 2021, our understanding is that a transfer to your new employer's fund will not be taxed, regardless of whether it is a Pension Fund or a Provident Fund.

The possible advantages of this option are:

• You preserve your Fund savings for your eventual retirement;
• It is likely to be a cheaper option than a Preservation Fund or Retirement Annuity Fund (e.g. no commissions are payable).

Leave your benefit in the Political Office-Bearers Pension Fund (i.e. become a Deferred Beneficiary or "paid-up member" of the Fund)

You may wish to continue as a Deferred Beneficiary (or "paid-up member") of the Fund. In this case:

• You will leave your benefit in the Political Office-Bearers Pension Fund to earn investment returns. 
• A monthly fee (which is R 235 p.m. as from 1 April 2024, and which may increase yearly thereafter) will be deducted from your Fund Credit, towards the costs of managing and operating the Fund.
• You can then choose at any time, even after age 50, to take up to the permitted maximum amount in cash (subject to tax), or to transfer everything to another fund, or to take part in cash and transfer the rest.
• After you reach age 50, you can choose to take your Fund Credit in the form of a retirement benefit  – you will be able to take up to the permitted maximum amount as a cash lump sum, subject to tax, and you must use the rest to buy a pension annuity for yourself.
• The main advantage of this option is that your costs are likely to be much lower. There is no commission. The investment management fees are at the level that the Fund has negotiated for all its investments, and therefore you will benefit from the economies of scale that the Fund has been able to achieve, instead of most likely paying higher fees associated with 'retail' savings options such as Preservation Funds.
• You also have the advantage that the Trustees monitor the performance of the investment managers with whom your money is invested on an ongoing basis.

If you do not give the Fund clear instructions when you leave office on how you want your benefit to be dealt with, you will automatically become a Deferred Beneficiary (although your Fund Credit will be reduced by any amount for which the Fund has provided a housing loan guarantee to your mortgage lender which the Fund is required to settle, and any tax on this amount).

Special Note for Deferred Beneficiaries (paid-up members)