Preservation Fund

Where your fund benefits increase in value – and remain accessible
Proper retirement planning should form a very important part of each person’s financial planning strategy. Times have changed. People no longer remain with just one company for their entire working lives. How rewarding your life after retirement is depends on how well you plan and make provision for it now. If you are leaving your employer’s fund due to resignation, retrenchment, or the winding up of your retirement fund it is essential that you preserve your current retirement savings.

So whether you resign to seek greener pastures, take a package, or your employer’s pension or provident fund is dissolved, you face the problem of having to decide what to do with the benefit amount from your pension or provident fund. How can you make sure you get the most out of your hard-earned money?

You’ll need a plan that will help you grow your capital and provide a level of income that enables you to maintain your current standard of living. In order to cater for this very specific need, First Mutual Life has tailored the Preservation Fund which aims to protect and preserve retirement and other benefits for both members exiting approved retirement funds and individuals alike. The Preservation Fund provides you a flexible opportunity of investing the fund benefit for your old age;  in a way in which it can increase in value but at the same time give you access to the funds in an emergency. It’s important to look after your current retirement capital, without dipping into your savings for expenses before you retire

The First Mutual Preservation Fund is a retirement saving plan which caters for 3 major market segments:-

• Individuals that wish to establish a retirement plan that allows for flexibility in terms of saving for retirement.
• Organizations such as Non-Governmental organizations that by the nature of the contracts awarded to staff prefer individualized retirement savings plans.
• Employees who withdraw from an established pension fund for a variety of reasons and wish to preserve their pension value so as to benefit upon attainment of retirement age.

Preservation Fund Benefits

• This fund is accessible to those employees who would have changed employers as well as individuals who may be self -employed and wanting to save towards their retirement capital.
• It allows you to transfer your benefit should you resign, and helps you stay on track for retirement in the event of retrenchment, dismissal, or the winding up of your employer’s retirement fund.
• No tax is payable on transfer.
• You may be tempted to cash in your retirement benefit and buy that car you’ve always wanted or go on an exotic island holiday. Generally, it is not a good idea to give into this spending urge. Not only will the tax man make you pay for this “privilege” you’ll also build up less capital for your retirement. You may make one withdrawal up to the full value of the preservation fund before retirement. (after a 5 year investable term and leave the rest for your retirement.)
• It gives you the opportunity to preserve retirement capital accruing from your years of service with a previous employer;
• It allows you to retain your full fund benefit and see it grow;
• Not only does it preserve your fund benefits, but the benefit of your completed years of service is also preserved until you retire. This could mean you have to pay less tax.
• You also have the flexibility of making ad hoc contributions without the possibility of the fund lapsing
• You retain the right to transfer your benefits to another pension or provident fund later.
• When you retire, whether on pension or as a result of disability, you receive the full remaining benefit from the preservation fund.
• Should you pass away at any given time, there is a life cover rider of up to three times your investment value which is payable to your beneficiaries.

What is the minimum contribution?
The current minimum investment required to become a member is USD50 or equivalent in Pound sterling, Euro, Pula or Rand. One has the option to select the level of future regular contributions depending on your circumstances. The minimum should be not less than USD50 per month. Limits may be waived in special cases.

Are the Preservation Fund contributions allowable for tax?
The Preservation Fund is an approved fund and in terms of existing legislation pension contributions up to USD5400 per annum are allowed as a deduction from income before calculation of PAYE income tax. The tax deductible amount is subject to change at the discretion of the Minister of Finance.

What happens if One can no longer afford the contributions?

• If one can no longer afford to pay contributions one may stop paying but one’s membership does not cease.
• One may resume payment at any time in the future and you are allowed to pay regular contributions monthly, quarterly etc. or you may make a lump sum or a combination of the two.
• One may not en cash your benefits unless you have attained age 55 and one should have been a member for at least 5 years from the time one made their first payment.
• Only under extreme hardship proven to the Commissioner of Insurance, Pension and Provident Funds can you be allowed to terminate your membership and receive cash. This is also subject to one having been a member for at least 5 years.