There are several important changes affecting the Pension Funds Act that came into effect earlier this year. They are collectively known as the default regulations.
The three that have application to members are:
Regulation 37 – Default Investment Portfolio
Regulation 38 – Default Preservation & Portability
Regulation 39 – Annuity Strategy
Here’s what you need to know:
Default Investment Portfolio
In Thacsa we implemented the Life Stage Model from 1 July 2015. This model changes the risk profile of the member’s portfolio according to age.
Members younger than 50 are invested in the Growth Portfolio.
- Once a member reaches the age of 50, we – unless otherwise instructed by the member – move 10% of the member’s fund credit from the Growth Portfolio to the Capital Protection portfolio every year until age 59. At that point the member would be fully invested in the Capital Protection Portfolio.
The member has the right to opt out of the default in terms of the Individual Member Choice option implemented in May 2016. We do recommend that a member consult professional financial advice before going against our recommended strategy though.
Default Preservation and Portability
The Trustees have amended the rules – Amendment No 5 – to permit saving of the member’s benefit when exiting the Fund.
In order to formalise this, a member who leaves service and wants to preserve the benefit should complete the new withdrawal form [click here]. The member must tick the option in the benefit option box and yes in the member election box on page three of the form.
Members who elect to make the benefit paid up can claim the benefit at any time thereafter should there be a need to do so.
However, at this stage, members cannot defer part of their benefit and take the balance out: the option is an all or nothing basis. Representations are being made to the regulator to allow for partial withdrawal.
Portability, the right to transfer the benefit to another approved Fund, was already provided for in the rules.
Great care has been taken to develop an annuity strategy that ensures members’ best interest are catered for at retirement.
Thacsa has chosen a Life Annuity (guaranteed fixed annuity) as the default annuity. Specifically, the Momentum Golden Income with Profit Annuity.
This annuity(pension) will provide members with an income for the rest of their lives. Annual increases will be declared by Momentum based on the underlying investment performance. The policy also makes provision for a spouse to continue receiving a monthly pension following the member’s death.
If members wish to participate in this programme they must opt in. They are not bound to do so and can still chose any other annuity from any other service provider of their choice.
Details of the Momentum product are available if required.
Retirement benefit counselling
As members approach retirement, counselling will be provided to members telephonically by Momentum in terms of the Golden Income with Profits Annuity product.
The role of this counsellor is to provide factual information about the Fund’s selected product and not general financial advice.
Members withdrawing from the Fund due to resignation will also receive counselling on their available options.
At all times you and members are free to call the Help Desk on 0860 22 22 88 with any specific queries.
Thacsa has introduced a share-call service to reduce the cost of contacting the Help Desk. All enquiries should go through the 0860 22 22 88 number.