PENSIONS: Towards a merging of funds
No national pension fund or investment changes yet, but provident funds will be treated like pension funds
It finally happened. After several years of last-minute reprieves, finance minister Tito Mboweni announced in the budget that the annuitisation of provident funds will be introduced.There will be no more lump sums on retirement for members of these funds; they will be treated in the same way as members of pension funds.From March 1 members of provident funds, like their counterparts in pension funds, will not be able to take their entire capital in cash. Members of both of kinds of funds will need to use two-thirds of their capital to buy an annuity (monthly pension).It was a sensitive issue at negotiations at the National Economic Development & Labour Council (Nedlac), and Alexander Forbes senior actuary John Anderson says there is a real concern that workers need access to their full capital — at least until there is a comprehensive social security system. They will still have this option if they resign from their jobs.And, it might be argued, a safety net is developing, even thou...