Cape Town - The changes to legislation regarding provident fund cash lump sums at retirement have hit the headlines recently, with very little understanding of the debilitating impact that the existing practice for the majority of provident fund members has on long-term retirement earnings.
This is the view of Martin Wagenaar, a wealth management consultant at leading financial advisory business, GTC.
The contentious changes aim to bring provident fund payouts in line with those of pension funds, which can pay out a maximum of one third of the benefit as a cash lump sum on retirement, with the remainder paid out in monthly instalments (a pension is purchased). This is referred to as “annuitisation”.