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PPS Preservation Funds

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Liberty Life
PPS Investments - Professional Provident Society

The preservation of valuable retirement funding is extremely important, and is a crucial consideration whenever you change employer in the course of your working life. The PPS Preservation Funds are pre-retirement products which are structured to preserve your retirement capital once you have left either a pension or provident fund and are particularly beneficial to members who have changed employment as a result of retrenchment, resignation or the closing of an occupational retirement fund.

You may transfer to a preservation pension or provident fund without paying tax at transfer, which means you are able to delay your tax liability until retirement. Preserving the tax status of an investment in this way has the effect of maximising the tax-free lump sum available and translates into higher investment returns.

The PPS Preservation Pension Fund and the PPS Preservation Provident Fund allow one withdrawal prior to retiring from the fund. A withdrawal of this kind will be taxed at your marginal tax rate.

Upon retiring from the PPS Preservation Pension Fund, a maximum of one third of your retirement proceeds may be taken as a cash lump sum, a portion of which is tax-free.

The PPS Preservation Provident Fund has no prescribed codicil relating to the purchase of an annuity. The full value of your retirement proceeds may thus be taken as a cash lump sum, with a portion being available tax-free.

KEY BENEFITS AND FEATURES

Investment options

The range of PPS Preferred Funds offers a selection of multimanaged PPS unit trusts that provide clearly defined underlying investment choices. We also give you the choice of a selection of top-performing single-manager unit trusts to ensure that you have a varied and well-defined range of alternatives.

Prudential Investment Guidelines Compliance

The PPS Preservation Funds are required to comply with the Prudential Investment Guidelines of Regulation 28 of the Pension Funds Act and with Exchange Control legislation. As such, the maximum permitted equity exposure is 75%, of which no more than 15% may be in international investments and no more than 25% in property.

Switching

You may change your investment options as often as you choose without incurring a transaction fee. Certain underlying fund managers do, however, charge an initial upfront fee for investment in their products, which would be applied upon your switch into those funds.

Board of Trustees

The PPS Preservation Funds are governed by an independent board of trustees with extensive experience and understanding of retirement fund issues. The board comprises a chairman, a professional principal officer and several trustees, all of whom are independent of the fund's sponsor.

Transfers

You may transfer an existing preservation fund to the PPS Preservation Pension or Provident Fund. You may also transfer your investment from either of the PPS Preservation Funds to another registered preservation fund.

Cessions

You may not cede your investment in the PPS Preservation Pension Fund or the PPS Preservation Provident Fund, or use it as security for debt.

Loans

You may not borrow from your PPS Preservation Pension or Provident Fund.

Death benefits

PPS Preservation Pension Fund
Upon your death, the proceeds of your PPS Preservation Pension Fund will be used to purchase an annuity to provide an income for your dependants and/or beneficiaries. Such income would be taxed at the marginal tax rate of the recipient(s).

Your beneficiaries or dependants would also have the option of commuting the proceeds to a cash lump sum, provided they do so within six months of death. In this instance, the lump sum would be taxed at your average tax rate.

PPS Preservation Provident Fund
Upon your death, the proceeds of your PPS Preservation Provident Fund may be converted into a lump sum immediately which will be taxed at your average tax rate.

Minimum investment

  • Lump sum: R50 000
  • Recurring: Not applicable
  • Ad hoc: Not applicable

Additional permissible investments would specifically be surplus payments due to accruals from the transferring fund.

Tax

The growth on your PPS Preservation Fund does not attract Capital Gains Tax, while interest, foreign dividends and rental income are currently untaxed.

COSTS AND CHARGES

Initial fees

The PPS Preservation Funds do not charge an initial fee on investment amounts, and investment in any PPS multi-managed unit trust will not incur initial fees either. Should you, however, choose to invest with one of the underlying fund managers, an initial fee of 0,25% (excluding VAT) may be charged.

Ongoing fees

An ongoing administration fee of 0,7% (excluding VAT) is charged annually on the PPS Preservation Funds. The fee is reduced by applying considerable 'partnership savings' that we have negotiated with the underlying fund managers. The annual administration fees that you pay are reduced by the full extent of these savings as follows:

Scenario 1

PPS Preservation Fund investing in a PPS multi-managed unit trust:

  • Annual administration fee 0,7%
  • Partnership saving 0,7%
  • Net annual administration fee 0%
Scenario 2

PPS Preservation Fund investing in a third-party single-manager unit trust:

  • Annual administration fee 0,7%
  • Partnership saving 0,4%
  • Net annual administration fee 0,3%

• Please note that partnership savings offered by third-party fund managers differ
• All fees quoted are exclusive of VAT

The annual management fees for the underlying unit trusts are fully disclosed on the investment option schedule.

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