Pre-retirement Guidelines

1. Pension

The pension calculation is based on three factors:-

a) your length of pensionable service; (+ Bonus Service if applicable).

b) your final annual average pensionable salary; and

c) your age at retirement.

Your age at retirement determines the percentage factor to be applied:

The amount that you will receive as a lump-sum gratuity when you retire is also based on three factors:-

i) Your length of continuous Council Service;

ii) Your final annual average pensionable salary earned during the last year of service; and

iii) The percentage applicable at your age of retirement.

3. Commutation of Pension

Your own personal decision

a) The Fund permits a retiring member, if he/she so elects, to commute for a lump sum payment, up to 33⅓% of his/her annual pension.

b) A lump sum is made available and the annual pension is accordingly reduced by the percentage commuted.
 
c) The value of the lump sum is determined according to the % of the annual pension commuted and a table of factors provided by the Actuary; which factors vary with age ie.

63 years = 9.35 factor
62 years = 9.64 factor
61 years = 9.92 factor

3.1 ADVANTAGES OF COMMUTATION

(a) An additional lump sum benefit which may be exempt from tax, in the year of your retirement.

(b) Whether you commute or not, the amount of the spouse pension payable on death will be unaffected. 

3.2 DISADVANTAGES OF COMMUTATION

The decision to commute will have a long-term effect on the monthly payment received.

The fully commuted amount would need to be invested with care to match the long-term performance of the pension.

Your basic pension, which forms the base for all future increases, will be smaller and will lead to disproportionate increases compared to a non-commuted pension.

4. Should I commute?

There is no easy answer to this question.  Generally speaking, you should only commute if it is your intention to invest the amount you obtain from commutation in order to supplement your reduced pension, and feel that you will then be better off than receiving your full pension from the Fund.

You will need to take the following into account:-

a) Your ability to make sound investments and particularly investments which will give you capital growth over a period of years to offset at least some of the effects of inflation.  (Your pension is at least partially inflation-proofed by the annual and other periodical increases paid by the Fund).  If the capital base can be maintained, the income yield can be at least constant or increasing to supplement the reduced pension after commutation.

b) The need to monitor your investments on a continuous basis in case the need arises to switch out of one of the investments into another in
  order to protect your capital.

c) The effect of the payment of tax on your investment earnings.  This will depend on your tax bracket, and nature of your earnings.

d) The fact that the commutation of your pension does not affect the pension payable to your spouse.

You should think very carefully before investing in any fixed interest type of investment (eg. Fixed deposit, participation bond, mortgage bond, Government stocks, tax free deposits, etc.), where the income from the investment and the capital value of the investment does not increase over the years, and where taxation and inflation absorb a part of what otherwise looks like an attractive investment.

Whilst you may initially be well off with this type of investment, the return will remain fixed, whilst your living costs will increase with inflation, making it more difficult as the years go by to meet your living expenses from your income.

The type of share investments which will provide a growing income and a growing capital value are obtainable on the Johannesburg Stock Exchange through a stockbroker.  Unless you have expertise in this sphere, you should make use of professional advice both in regard to the selection of a suitable spread of initial investments and in monitoring them for so long as you hold them.

You should not go into equity investment unless it is your intention to remain invested over a long period - at least five years.  Market prices of shares fluctuate quite considerably because of economic conditions and it would be wise to invest in a number of well-established companies with proven records rather than in enterprises which may or may not give a “quick return”.

Unit trust companies have become a particularly popular avenue of investment; they provide the capital growth obtainable from an investment on the stock exchange but the risk is reduced by investing through a well established unit trust company with a diversified portfolio.

The down side remains in the form of administration costs and the fact that fluctuating share prices will impact directly on the value of the unit trusts.

If you have any doubts, it would be better not to commute and in this way to retain a higher pension which the Fund will then augment from time to time to the best of its ability.

5. What you have to do (before you retire)

Retiring members must contact the Fund’s office at least 4 weeks prior to retirement with the following documents/details:-

  1. Identity Document
  2. Spouse’s Identity Document
  3. Marriage Certificate/Certificate of Customary Union
  4. Children’s/Students’ Identity Documents
  5. Bank/Building Society Account Number
  6. Postal and Residential Address
  7. *Tax Number
  8. Current Payslip
  9. Passport size photo for pensioner’s card
 10. Preferably a copy of the last will
 Should you have any queries on the above matter please contact :-
 Mrs Shirley Rampersad  - Tel : (031) 311 1605
 Ms Rabia Moosa   - Tel : (031) 311 1604

*NOTE: 

In view of the tax implications members must take cognisance that it is no longer feasible to receive the retirement benefits on the expected date (i.e. the next working day following retirement) due to the necessity to obtain a tax directive from the South African Revenue Services on the tax due.  Accordingly, members are advised that there will be delays in the payment of pension benefits.  It will be appreciated if members prior to their retirement complete and submit all the relevant forms and details to the Fund timeously to facilitate an early reply from the South African Revenue Service.  Steps have been taken with the Tax authorities to limit any delay as much as possible.

6. After you Retire

1. Your gratuity (and commutation) is paid electronically into your bank account.

2.   What may be deducted from my monthly pension?

2.1 Medical Aid

If you are a member of a medical aid scheme you will need to make contact with them should you wish to continue your membership.

2.2   Taxation on monthly pension, if applicable.

3. Every year you will be sent a Pension Continuation Certificate; this must be completed and returned promptly, to avoid suspension of pension payments.

4. Advise the Fund timeously and in writing of a change of banking details and personal particulars.

5. Contact the office whenever you have a problem with your pension.

7. The fund undertakes to:

1. Pay your pension into your account on the 27th of each month, or closest working day prior to the 27th if the 27th falls over a weekend or a public holiday.

2.   Provide a pay advice on your first pay month and thereafter only when there is a change of earnings, e.g. July (increase), November (bonus) etc.

8. Annual Bonus

An annual bonus is paid in November each year.  The bonus paid is equal to the actual pension paid in that month.

9. Annual Increases

Increases in pensions are granted from 1 July each year, the size of which is determined by the Actuary and is based on the income earned by the Fund and the increases recorded in the Cost of Living Index.

10. Benefits on Death of a Pensioner

1) The widow/widower of a pensioner will receive 60% of the basic pension before the commutation plus subsequent increases.  If however, the marriage was contracted after retirement, the widow/widower will receive 40% of the basic pension.

2) Child pensions will also be applicable if the child has not been married and is:-

a) less than 18 years of age; or

b) less than 24 years of age and still in full-time study.