• Sharebar
Pension Funds
Friday, November 27, 2015 - 08:30
Laws of erosion

The deductions allowed under the Income Tax Act and the Maintenance Act are tax and maintenance orders. The Pension Funds Act allows a retirement fund to make the following deductions from the pension benefits of a member, after tax has been deducted:
• Where the fund rules allow the member to take a housing loan from the fund itself against security of his pension benefit, and the member still owes the fund an amount when he leaves the fund, the fund can deduct that amount from the member’s benefit and pay the member the rest.
• Where the fund rules allow the member to take a housing loan from a bank with the fund then being the surety for that loan, the fund can deduct that amount from the member’s benefit and pay the member the rest if the member stills owes the bank an amount on that loan when he leaves the fund.
• Where the member’s employer gave a housing loan or a housing loan to the member, the employer can claim the outstanding amount from the fund when the member leaves the fund. The fund will then deduct that outstanding amount from the member’s benefit and pay the balance of the benefit to the member.
• Where the member caused damage to the employer because of the member’s theft, dishonesty, fraud or misconduct, the employer can claim that from the fund. The requirements relating to this deduction will be discussed in a later article.
• The fund can deduct medical scheme contributions or insurance premiums that it paid on behalf of the member or his beneficiary.
• The fund can also deduct divorce orders and maintenance order amounts, and tax on maintenance order amounts, from the member’s benefit. This will also be discussed in a later article.
Protection of a member’s pension benefit if the benefit is still in the fund: while a member is still in a retirement fund, their creditors (someone who the member owes money to) cannot claim any part of the member’s benefit, neither can the member or their beneficiaries use their benefit as security i.e. to take out a personal loan with a bank, says Hettie Joubert, Legal Adviser at Momentum Employee Benefits. “If the member does this, the trustees of the fund can decide not to pay the benefit to the member, instead they can decide to pay it to their dependents’ beneficiaries, guardians or trustees. The only deductions that can be made from the benefit, before the fund pays it out are those allowed for by the Pension Funds Act, the Income Tax Act and the Maintenance Act.”
In addition, section 65 of the Magistrates’ Courts Act allows for a portion of the member’s pension benefit to be taken into account in specific situations. Explains Joubert, a creditor can apply to a court for a warrant of execution against the assets of the member. “The effect here is that the assets of the member, to the value of what he owes the creditor, will be sold to pay the creditor.”
Where the member does not have any assets, the creditor can go to court to get an order under which the member will then have to pay a specified amount every month to the creditor, until the debt (including interest) thereon has been paid off. At these court proceedings, the member has to list their assets and liabilities so that the court can determine how much the member can afford to pay every month. To determine what the member’s assets are, the court can take an amount of R3 000 per year relating to the member’s benefit into account. This can then be added to the member’s assets, and the court can then determine how much the member can afford to pay to the creditor.

Copyright © Insurance Times and Investments® Vol:28.11 1st November, 2015
1168 views, page last viewed on June 20, 2018