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Frequently Asked Questions 

Membership of the Fund

  1. Do I have to join the Fund?

DPA and CoE

  1. What are DPA and CoE?
    DPA - Deemed pensionable amount (as determined by you)
    CoE - Cost of Employment

    All permanent and T2 contract staff are required, as a condition of service, to become members of the employer’s provident fund (UCTRF). In terms of the rules of the provident fund, contributions to the fund are payable by the employer as part of a staff member’s CoE (currently 22,5% of the Deemed Pensionable Amount for permanent staff and 20,912% for T2 contract staff). The Deemed Pensionable Amount (DPA) is a percentage of guaranteed CoE and is a figure used to calculate the amount allocated to the UCTRF and UCTRF benefits. Staff may elect this percentage at the beginning of each year. The following are the recommended DPA’s linked to annual CoE:

    Annual Cost of Employment

    Recommended DPA

    Up to R150 000

    70%

    R150 001 to R250 000

    75%

    R250 001 to R400 000

    78%

    R400 000 +

    80%

     

  2. Can I change my DPA? When can I change my DPA?

    Staff may negotiate an increase or decrease in their DPA which will result in a greater or lesser UCTRF contribution amount. There will be an associated increase or decrease in the Group Life Assurance cover, disability cover and the fringe benefit on the Separate Group Life Assurance cover. Please note, however, that any increase in the UCTRF contribution will not result in an increase in your guaranteed CoE, but will form part of your guaranteed CoE.

    The DPA amounts are optional between 50% and 100% subject to the following conditions:

    (i) Staff who increase their DPA by more than 10% may be required to complete a health questionnaire for the insurer who reserves the right to limit the cover based on their underwriters assessment.

    (ii) Once a member has increased their DPA they can only reduce it, at a future annual CoE review, to a minimum of 50% of their guaranteed CoE.

    (iii) Staff who decrease their DPA to less than the recommended amount must schedule an interview with their HR Practitioners who will take them through the consequences of their decision and ask them to sign an acknowledgment of these consequences.
    If any changes in DPA or additional contributions result in your retirement contribution being greater than 20% of your earnings for the current tax year, UCT is legally obliged to advise SARS (South African Revenue Service).

  3. Why has nobody ever told me before that I may change my DPA?

    Your HR Practitioner should advise you of this option at every CoE change.

  4. What is my % DPA?

    Please contact your HR Practitioner should you require this information. You can also view your Deemed Pensionable Amount on your payslip you receive from UCT under 'other information'.


Contributions

  1. Can I contribute more/less towards my retirement funding?

  2. How much do I contribute towards the Fund?

  3. What is the difference between accumulated account and future contributions?
    Your accumulated account is your total value in the Fund, referred to as your Retirement Savings Account.  Your future contributions are all the monthly contributions you are still going to make into the future.

  4. Do I have to complete both accumulated account and future contributions columns on my choice form?


Divorce orders

      

A member’s retirement benefits may form part of the couple’s overall assets and a portion is often paid to the ex-spouse in the case of divorce. The portion paid to an ex-spouse will depend on the percentage specified in the Divorce Order. 


What information should be contained in a Divorce Order?

The following information should be included in your Divorce Order; otherwise the Fund cannot pay the ex-spouse directly: 

• The full name of the Fund (i.e. the University of Cape Town Retirement Fund) 
• That the Fund is ordered to pay the benefit to the nonmember spouse 
• The value of the benefit either as a % or Rand value 

If the Divorce Order does not make these provisions, the Administrator of the UCTRF has no obligation to pay the ex-spouse any portion of the member’s benefit.

Here is a suggested clause to be used in the Decree of Divorce to ensure that the Decree is legally binding on the Fund:

The non-member spouse is entitled to % of the member’s pension interest in the University of Cape Town Retirement Fund on the date of divorce. The University of Cape Town Retirement Fund is ordered to pay this amount to the nonmember spouse, together with interest earned in the Fund on this amount from the date of divorce to the date of payment. 

When will the benefit be paid to my ex-spouse? 

Due to the recent changes to the Divorce Act, the non-member spouse can receive the benefit from the Fund immediately, subject to the Decree of Divorce complying with the requirements of the Act. Previously, the nonmember spouse would have to wait for the member spouse to withdraw or retire from the Fund before receiving the benefit entitlement. 

The payment will be processed once you have provided the Fund with your Divorce Order. This should happen as soon as possible after the date of divorce. 

Who will pay the tax on the benefit paid to my ex-spouse? 

Previously, the member paid the tax on the ex-spouse’s benefit, except if the Divorce Order stated otherwise. With effect from 1 March 2009, the exspouse pays the tax on his/her benefit.


Investments

  1. Where is my benefit invested?

  2. Where should I invest my benefit?

  3. Do I have to make a switch during the switch opportunity exercise?
    No, it is important that you invest your retirement savings according to your risk profile and only switch your investments when your investment profile changes (which will only be every few years or longer). Click here for more information on how to make an investment choice.  The most common investment mistakes (one of which is trying to time the market - switching your investments when markets drop) can be viewed here.

  4. What does a “market value adjustment” mean? And why is it implemented sometimes?
    A market value adjustment is when the assets of an investment is adjusted to the true market value.  This is very similar to the re-evaluation of your house from time to time.  It occurs when the underlying assets of the investment has changed in value.

  5. Which Fund do you think I should invest in?

  6. What is “final payment risk”?

  7. What is the Life Stage Model and why do we have such a model?

  8. Do I have to send the Investment choice form back – even if I do not want to make any changes?
    No, if you do not return you investment choice form, your investment option will remain the same.


Withdrawal Benefits

  1. How much money will I receive when I resign?

  2. On how much will I be taxed at resignation?

  3. How soon after resignation will I receive my benefit?
    You will receive your monies from the Fund within 15 business days of receipt of all necessary information, provided that all contributions have been received and are up to date and receipted and that Sanlam Employee Benefits receives a tax directive from SARS within 2 business days of making such an application.

    This service level shall be extended for the same period that these requirements are not met.

  4. Will I receive interest on my benefit while my payment is being processed?
    Yes. Your money is invested in a money market account until the tax directive is applied for and from this date bank interest is added until date of payment to you.


Retirement Benefits

  1. How much money will I receive in 2 years’ time (or at a future date), or when I retire?
    You will receive your Retirement Savings in the Fund. Your projected Retirement benefit is indicated on your Annual Benefit Statement that you receive from the Fund in February of each year.

  2. How much will I be paid as a monthly pension?

    The UCTRF is a Provident Fund and is designed to provide a pension (in the form of an annuity) at retirement.  However, full commutation of this benefit is allowed, which means that you can choose to receive your retirement in any of the following ways:

    (a)     As a monthly pension only;
    (b)     As a monthly pension and a lump sum; or
    (c)     As a lump sum, in a once-off payment in final settlement of your benefit.

    If you elect option (a) as a monthly pension only, you must choose either a living annuity from the UCTRF or purchase a life or living annuity from a registered insurer.  When choosing your pension, you should arrange a type of pension and amount to suit your particular needs.  This is why it is advisable to see a Financial Advisor when planning your retirement.

    If you elect option (c) as a lump sum, in a once-off payment in final settlement of your benefit, then the UCTRF’s obligation to you ends the day you receive your retirement fund credit as a lump sum. 

    It is important to note that the UCTRF’s obligation to you also ends should you choose an annuity from an insurance company, rather than a living annuity from the UCTRF.

    If you elect option (b) as a monthly pension and a lump sum, the same conditions apply as stipulated above.

    What is a ‘life annuity’?

    It is a monthly pension, which is guaranteed for your life.  The insurer calculates the pension you will receive every month and this depends on the amount of your retirement fund credit and the type of pension you choose.  The following factors play a role:

    • Whether you have elected to take a lump sum, or not;
    • Whether you have elected to include a guaranteed period, or not - 
      • This means the pension will continue to pay out (to whomever you elect i.e. your spouse and/or your dependants) until the terms ends, even if you die during this period.  For e.g. if you choose a 5 year guaranteed period, your pension is guaranteed to pay out from your retirement date until the end of the 5 years, even if you die in the first year.
    • Whether you have elected that a spouse’s or dependant’s pension must be paid after your death –
      • This means the pension will continue to pay out (for life) to your spouse or dependant after your death, even after the guaranteed period has expired.  However, should your spouse also die after the guaranteed period has expired and you did not choose to include a dependant pension, the monthly pension will no longer pay out.
    • The insurer guarantees the pension, so it provides you with security – the only risk is if the insurer becomes insolvent.

What is a ‘living annuity’?

When you leave your retirement fund credit with the UCTRF (or an insurer providing a similar product), it is then treated as a savings account and will grow with investment returns. 

The Commissioner for the SA Inland Revenue Services (RF 1/96 as amended), stipulates that you must take between 2.5% and 17.5% of the total value of your account annually as a pension, but that the annuity must at all times produce a life annuity.  This may mean that the maximum you may take is likely to be lower than the normal range of 17.5%.  You can adjust your pension annually within these constraints.

The pension can be paid to you monthly, quarterly, biannually or annually (if you take a monthly pension, the monthly amount is fixed for the coming year based on the amount invested at the beginning of the year and your chosen percentage).

  1. On retirement, how much can I take in cash?
    You will be able to take your entire benefit in cash.  This is not a recommended option due to the tax implications. 

  2. How much will I be taxed at retirement?
    No tax is payable on your retirement benefit if you choose to use your full benefit to purchase your pension. There will be tax payable on the pension payment that you receive, based on individual income tax rates, this can be calculated by your Financial Advisor at the time of your retirement.

  3. How soon after retirement will I receive my benefit?
    You will receive your monies from the Fund within 15 business days of receipt of all necessary information, provided that all contributions have been received and are up to date and receipted and that Sanlam Employee Benefits receives a tax directive from SARS within 2 business days of making such an application. However, any information that is required and/or request and not submitted or is outstanding, will delay the process.

  4. Will I receive interest on my benefit while my payment is being processed?
    Yes. Your money is invested in a money market account until the tax directive is applied for and from this date bank interest is added until date of payment to you.

  5. Can I decide where to purchase my Living Annuity?
    Yes, please refer to the different pension options at retirement link on the Retirement Benefit page for more information on the options available to you.

  6. Can I split my benefit between more than one Living Annuity?
    Yes, the rules of the UCTRF allows that a Member, Deferred Pensioner or a Beneficiary may purchase a pension in the form of a life annuity, from the Fund (where the Fund allows this), a Living Annuity from the Fund, a life annuity from an Insurer, or a living annuity from an Insurer, or more than one of these.

  7. Can I decide where to purchase my living annuity?
    Yes, the rules of the UCTRF allows that a Member, Deferred Pensioner or a Beneficiary may purchase a pension in the form of a life annuity, from the Fund (where the Fund allows this), a Living Annuity from the Fund, a life annuity from an Insurer, or a living annuity from an Insurer, or more than one of these.

  8. Can I change Insurers at a later date if I took the Living Annuity with UCT in the first instance?
    Yes, the rules of the UCTRF allows that a person in receipt of a Living Annuity may instruct the Fund to apply the Living Annuity balance to purchase a life annuity, or living annuity from an Insurer.

  9. Can I apply for unemployment when I retire and how much will I receive?
    Yes, staff members who have contributed to the UIF, can have a UI 19 completed for them on retirement and they can register with the Department of Labour for benefits that might be payable to them.

  10. What other benefits will I receive when I retire?
    Other benefits are:

    Tuition fees:

    UCT's retirees pay staff tuition rates (usually equal to 25% (retired full-time staff) or 40% (retired part-time staff) of the tuition fees in respect of themselves, their spouse or their dependant children who follow a full-time course of study at UCT.

    Sport facilities:

    A UCT retiree is eligible for membership of the different University sports clubs. Use of the swimming pool and tennis courts is free of charge. The cost of membership of any particular club is that applicable to staff members. Applications for membership must be made to the Sports Administration showing them your UCT Retiree card. It is necessary to register annually for membership.

    Library membership:

    Staff who retire retain free borrowing privileges at the UCT Libraries. A Library Subscriber’s Application Form has to be filled in to obtain a library card, which must be renewed annually. This entitles you to borrow up to 12 books at any one time, with a 5-week loan period.

  11. How much medical aid subsidy will I receive as a retiree?
    The UCT Medical Aid Scheme is currently the Discovery Health.With effect from 1 June 2000 the entitlement to the post retirement medical aid subsidy has been restricted to an accrual of 2% per year of service, up to a maximum of 50%, of the cost of the subscription for the UCT Medical Aid Scheme.
     
     The subsidized option for retirees is the Coastal Saver plan with maximum savings.  

  12. Can I change my medical aid options as a retiree?
    Yes, you can. And annually at the end of each year you'll be given the chance to change your medical aid option (either upgrade or downgrade).


Death Benefits

  1. What are my death benefits?

  2. When can I update my nomination of beneficiaries?

  3. How often should I complete the Beneficiary Forms?

  4. Where can I send my forms once completed?
    Please provide your form to your Human resources department.

  5. When can I update my nomination of beneficiaries?


Divorce

  1. I am divorced. How will that affect my payout and what is the current situation with tax on divorce payouts?

    If you are divorced and your divorce order specifically stipulates that a portion of your UCTRF benefit must be paid to your former spouse, then you must please provide a certified copy of your divorce order to the UCTRF.

    If you are considering, or currently in the process of divorce, please ensure that your attorney understands both how the Income Tax Act and the Pension Funds Act works in relation to benefits payable to former spouses from a fund:

    • Treasury issued a media statement on March 13th, 2012 advising that the Income Tax Act will be amended to ensure that the so-called “clean break” principle will apply to any pension interest (in respect of a member of any private, or public sector retirement fund) awarded in terms of Section 7(8) of the Divorce Act, as from 1 March 2012.
    •  According to the media statement, the effect of the proposed changes will be as follows:
      • If an amount becomes payable from a fund to a non-member spouse on or after 1 March 2012, that person will be subject to tax in respect of the amount awarded in terms of a section 7(8) divorce order; and
      • No tax will be payable on any amount that becomes payable on or after 1 March, in terms of a divorce order that was issued before 13 September 2007.
         

The portion of your benefit due to your spouse will be paid to them as soon as they elect to receive the benefit, and if the divorce order complies with the requirements as per the Pension Funds Act and Divorce Act.

Information to be contained in your divorce order

Ensure the following information is included in your divorce order, otherwise the Fund cannot pay the ex-spouse directly:

    • The name of the Fund: UCT Retirement Fund
    • The percentage (0-100%) or the actual amount to be paid to the ex-spouse
    • An order to the Fund to endorse the Fund’s records and to pay the pension interest of the ex-spouse directly to him / her.

If the divorce order does not make these provisions, the administrator of the Fund has no obligation to pay the ex-spouse any portion of the member’s benefit.

Financial Planning

  1. Does the UCTRF have a list of recommended/preferred Financial Advisors that I can contact?
  2. What is a Living Annuity?
    Please refer to the different pension options at retirement link on the Retirement Benefit page for more information on Living Annuities.

  3. What is a Life Annuity?
    Please refer to the different pension options at retirement link on the Retirement Benefit page for more information on Life Annuities.