If you work for multiple employers or have worked for many years, you may have significant amounts of money in one or more Provident funds. This is because the employer is legally required to contribute to the pension and many employers choose provident funds because they are more flexible than pension funds. Above all, it is flexible to be able to withdraw from the pension fund before retirement. with certain conditions.
Step by Step Guide to Claim from Provident Fund
Since companies contribute to different funds, the contact numbers and website details – even the withdrawal process – will change. However, the step by step process detailed below should remain the same and help you claim your provident fund.
Step 1: Contact the HR Department of the Previous Employer
If you have worked at one or more companies before but have not claimed from your provident fund, you should start by creating a list of your former employers. From there, you will need to get in touch with the HR department of each employer to request information about the provident fund they were contributing to while you were employed. In some instances, you can make a withdrawal request through the HR department. However, now that you have the information about the provident fund, you can claim directly from the fund.
Step 2: Request a Withdrawal Form
If the money is in your previous employer’s retirement fund, you can request a withdrawal form directly from them. However, if the money has been transferred to a third-party administrator, once you have received their contact information, you will need to approach them to request a withdrawal form.
Step 3: Provide Relevant Supporting Documentation
If the fund was managed by the company where you were employed, you will likely only need to submit a certified copy of your ID alongside the withdrawal form to access the funds. However, if it is held by another company, you may also need to provide other supporting documentation. This can include proof that the company that contributed to the fund no longer employs you, and if you want to transfer any money to another retirement fund, the details of the new retirement fund.
Step 4: Wait 14 to 21 Days For Funds to Reflect
If your taxes are in order (you don’t have any outstanding taxes), your provident fund should be paid out in 14 to 21 business days after you have submitted all relevant information and your request has been approved.
How Much Tax Do I Pay on a Provident Fund Withdrawal?
Before you start making plans on the amount you could potentially receive from provident fund withdrawals, remember you have to pay SARS. The money you may have saved in these funds will not be the windfall you expect it to be because it has to be taxed.
How much tax you pay on your provident fund withdrawal will depend on: how much you’re withdrawing at that time and how much you’ve withdrawn in the past.
Since SARS shows no distinction between retirement funds – provident fund, pension fund, preservation fund, or retirement annuities – any withdrawals you’ve made from any fund contributing to your retirement will be totalled to determine how much you’ll pay in taxes.
Keeping that in mind, the tax you’ll pay is as follows:
- Withdrawals Up to R25 000: 0% in taxes
- Withdrawals above R25 001 and below R660 000: 18% in taxable income above R25 000.
- Withdrawals above R660 001 and below R990 000: R114 300 + 27% of taxable income above R660 000.
- Withdrawals above R990 001: R203 000 + 36% of taxable income above R990,000.
Another aspect to consider when withdrawing from your provident fund is that you may also be subject to fees from the company managing the fund, in addition to the taxes.