The Government Employees Pension Fund (GEPF) has issued a notice to members and pensioners that the new Taxation Laws Amendment Act will not affect their pensions or benefits. As a defined-benefit pension fund, the benefits of the GEPF are already taken as one-third as a lump-sum gratuity and two thirds as a pension. The new law will, however, affect the recording and attribution of the employer’s contribution in respect of active members. It will also increase the amount that can be contributed to the fund tax free for the majority of its members, which is a positive benefit.
The new tax laws were put in place to safeguard the retirement savings of all South Africans who contribute to retirement funds. These changes will mostly affect members of provident funds who will now have to split their retirement benefit, taking one third as a lump sum and two thirds as a pension, but only on the portion of their benefits accumulated after 1 March 2016. All amounts accumulated up to this date may still be taken as a lump sum.
GEPF principal executive officer Abel Sithole stressed that the fund continues to work for the financial security of its members and pensioners.
“Members of the GEPF will be able to access their pensions after 1 March 2016 in exactly the same way as they can be accessed currently. None of the calculations and benefits will change due to these changes,” says Sithole.
He urged members not to panic and not to consider leaving the fund in order to access their full pension benefits. He said the new Act would not take away the right of pension fund members to withdraw their benefits before or at retirement as a lump sum. However, the tax implications of doing so still apply and substantially reduce one’s retirement benefit.
He strongly reiterated the benefit for government employees of working until their retirement date in order to continue contributing to their pension for as long as possible, which will lead to a bigger pension.
Any member who is unsure about their pension benefits should seek clarity from their human resource department or contact the GEPF on 0800 117 669.