If you’ve worked at several employers or have worked for many years, you likely have quite a bit of money in one or more provident funds. That’s because, by law, your employers are obliged to make some contribution to your pension, and many employers choose to use a provident fund as it is a more flexible option compared to a pension fund. One thing that makes it flexible is that you can withdraw from the pension fund before retirement; with certain conditions.
Can I Withdraw Funds from My Provident Fund?
Prior to changes that took effect in April 2021, you could withdraw the entire provident fund as one lump sum. However, to ensure more South Africans have money saved up for retirement, the government now only allows you to withdraw 25% of your pension fund contribution before retirement, with the remaining 75% having to go toward another retirement investment.
That said, if you do want to withdraw from your Provident fund, there is one condition: you must no longer be employed by the employer that was giving the contribution. This means to access your provident fund from a previous employer, you must have resigned, have been retrenched, or have been dismissed. If you meet these conditions, you can follow the steps outlined below to claim your provident fund.
Step by Step Guide to Claim from Provident Fund
Since companies contribute to different funds, the contact numbers and website details – even the withdrawal process – will change. However, the step by step process detailed below should remain the same and help you claim your provident fund.
Step 1: Contact the HR Department of the Previous Employer
If you have worked at one or more companies before but have not claimed from your provident fund, you should start by creating a list of your former employers. From there, you will need to get in touch with the HR department of each employer to request information about the provident fund they were contributing to while you were employed. In some instances, you can make a withdrawal request through the HR department. However, now that you have the information about the provident fund, you can claim directly from the fund.
Step 2: Request a Withdrawal Form
If the money is in your previous employer’s retirement fund, you can request a withdrawal form directly from them. However, if the money has been transferred to a third-party administrator, once you have received their contact information, you will need to approach them to request a withdrawal form.
Step 3: Provide Relevant Supporting Documentation
If the fund was managed by the company where you were employed, you will likely only need to submit a certified copy of your ID alongside the withdrawal form to access the funds. However, if it is held by another company, you may also need to provide other supporting documentation. This can include proof that the company that contributed to the fund no longer employs you, and if you want to transfer any money to another retirement fund, the details of the new retirement fund.
Step 4: Wait 14 to 21 Days For Funds to Reflect
If your taxes are in order (you don’t have any outstanding taxes), your provident fund should be paid out in 14 to 21 business days after you have submitted all relevant information and your request has been approved.
How Much Tax Do I Pay on a Provident Fund Withdrawal?
Before you start making plans on the amount you could potentially receive from provident fund withdrawals, remember you have to pay SARS. The money you may have saved in these funds will not be the windfall you expect it to be because it has to be taxed.
How much tax you pay on your provident fund withdrawal will depend on: how much you’re withdrawing at that time and how much you’ve withdrawn in the past.
Since SARS shows no distinction between retirement funds – provident fund, pension fund, preservation fund, or retirement annuities – any withdrawals you’ve made from any fund contributing to your retirement will be totalled to determine how much you’ll pay in taxes.
Keeping that in mind, the tax you’ll pay is as follows:
- Withdrawals Up to R25 000: 0% in taxes
- Withdrawals above R25 001 and below R660 000: 18% in taxable income above R25 000.
- Withdrawals above R660 001 and below R990 000: R114 300 + 27% of taxable income above R660 000.
- Withdrawals above R990 001: R203 000 + 36% of taxable income above R990,000.
Another aspect to consider when withdrawing from your provident fund is that you may also be subject to fees from the company managing the fund, in addition to the taxes.
Steps To Take To Lodge a Complaint Against a Provident Fund
If you’re unable to withdraw or feel there are irregularities with your withdrawal or management of your provident fund, you have some recourse. The Pension Funds Adjudicator, which was established according to section 30B of the Pension Funds Act, 24 of 1956, investigates and resolves any irregularities. However, to make a complaint with the PFA, the fund must either have been mismanaged, made decisions outside of its powers, that the employer has not followed the rules of the fund, or a dispute (based on fact or law) has arisen between the fund and yourself.
If your complaint meets any of the criteria mentioned above, follow the steps outlined below.
Step 1: Gather Supporting Documentation
The first step you should take before laying a complaint is to gather supporting documentation and evidence. Doing this will substantiate your claims and ensure you have a speedy resolution.
Step 2: Make a Complaint to Your Employer or the Fund in Writing
Once you have gathered your supporting documentation, but before you can complain to the PFA, you will need to make a formal complaint – in writing – to your employer or the fund. This complaint must have been made – and not resolved – at least 30 days before approaching the PFA.
Step 3: Submit a Complaint Through the PFA
If 30 days have elapsed and no resolution has been made, you can now submit a complaint to the PFA.
To do this, you can visit the PFA website and scroll down to ‘Lodge a Complaint‘. You will then need to select whether you want to submit an online form or a manual form. If you select an online form, you will be redirected to a complaint form, which you need to fill in.
As part of your complaint, you will need to provide your personal details, your previous employers’ details, details about the fund, and proof and documentation relating to your complaint.
From there, the PFA can begin investigating.
Before you decide to claim from your provident fund, be sure that you’ve weighed up all your options and are coming to a financially sound decision. A decision that won’t negatively affect your retirement or future. While you may need the money temporarily, the long term ramifications of not having enough in retirement savings when you retire can be even more severe.