Question:
If I have already retired and my fund was below R75 000 can I still cash in the balance?

I retired three years ago and receive a small monthly amount of R275.

Question:
It appears that you find yourself in exactly the type of situation the current legislation is trying to prevent ? a retired annuitant receiving an income that is almost too small to be viable. The decision a retirement fund member makes at retirement regarding the benefit (i.e. which portion to access as an income and/or lump sum) can unfortunately not be amended at a later stage. The retiring member?s decision has taxation consequences which will apply to the tax-year in which the member retires.

The provisions allowing a member to take the full retirement benefit from a pension or retirement annuity fund as a lump sum if the total benefit does not exceed R75 000 only apply to retirement benefits accruing to members after 1 October 2007. That option would therefore not have been available to you when you retired.

Before 1 October 2007, members could only take their full retirement benefit as a lump sum if the total value did not exceed R25 200. This is the regime that would have applied at the time of your retirement. If your total value therefore exceeded that amount, you would not have had the option for a full commutation.

Your question highlights the importance of seeking professional financial advice at the point of retirement. Options with regard to retirement fund benefits are provided to fund members, but the full impact and long-term consequences of selecting one option over another are rarely explained. Making sense of all the variables can be daunting to say the least. A number of choices need to be made which are likely to significantly impact on the lifestyle a person will be able to afford in retirement. Here are some examples:

• Which portion of the retirement benefit to be taken as a lump sum and the tax consequences.

• Which annuity type (to be purchased with the compulsory portion of the retirement benefit) is best suited to the retiring member?s personal needs.

• Which investment strategy and draw-down percentage to consider in cases of a living annuity.

These are but a few considerations which I would recommend be made after consulting a Certified Financial Planner who can advise thoroughly on all available options as well as all potential consequences.

Unfortunately, the option you exercised three years ago is irrevocable. I certainly hope that readers close to retirement will take heed and not attempt to make these extremely important decisions on their own. A professional planner, after putting together a holistic financial plan, will walk a client through all stages of retirement and through regular reviews keep you updated on factors influencing your plan and whether you are still on track to achieving your goals.

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