Withdrawals on preservation funds
Transferred benefit was pre-retirement benefit
A member of the Momentum Pension and Provident Preservation Funds (the preservation fund) who transferred a pre-retirement benefit such as for example a withdrawal or liquidation benefit to the preservation fund is allowed to make one withdrawal from the preservation fund during his membership of the preservation fund.
If the member made a withdrawal from his pension or provident fund beforetransferring to the preservation fund, that does not count as his one preretirementwithdrawal. Examples of this are a member who decided to take apart of his withdrawal benefit in his pension fund as a lump sum and transferthe balance to the preservation fund, or a member who had an outstandinghousing loan at the time of his withdrawal from his pension fund which thepension fund settled when he withdrew from the pension fund.However, if the member transferred from another preservation fund and hehas already made a withdrawal from that preservation fund beforetransferring to the preservation fund, that does count as his one preretirementwithdrawal. He will then not be entitled to another withdrawalfrom the preservation fund.
The right to make a pre-retirement withdrawal applies separately to eachpayment or transfer to the preservation fund. This means that we should havea separate record or account for each amount that the member transferredinto the preservation fund. If he for instance resigned from three employersand transferred his withdrawal benefits from three different funds to thepreservation fund, he will have three different records in the preservationfund. He may then make a pre-retirement withdrawal from each one of thesethree records. However, if the amount that he withdraws is more than theamount in one of his records, it will result in him restricting his future pre-retirement withdrawals.
This is best illustrated by way of an example.
- Mr M resigned from employer A and transferred his R10 000 withdrawal benefit from fund X to the Momentum Pension Preservation Fund. This will be record 1.
- Two years later he resigned from employer B and transferred his R20 000 withdrawal benefit from fund Y to the Momentum Pension Preservation Fund. This will be record 2.
- A year later he resigned from employer C and transferred his R15 000 withdrawal benefit from fund Z to the Momentum Pension Preservation Fund. This will be record 3.
- He now withdraws R25 000.
- None of the three records has R25 000 in it. The withdrawal therefore has to be made from two records.
- If the preservation fund takes the R10 000 in record 1 and uses R15 000 of the R20 000 in record 2, it will mean that the member now only has one more withdrawal available, and that withdrawal must be made from the R15 000 in record 3.
- If the preservation fund takes the R10 000 in record 1 and uses the full R15 000 in record 3, it will mean that the member will be entitled to make another withdrawal from record 2, which has a value of R20 000.
- In this example, it would be better to split the R25 000 withdrawal between records 1 and 3 instead of between 1 and 2, because the member will be left with the option of making a withdrawal against a bigger amount.
