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Wealth Management




By Jenny Gordon, Head of Technical Advice at Alexander Forbes


The Taxation Law Amendment Act of 2020 was signed into law by the President on 20 January 2021. This has enacted the long awaited legislation which provides for the same annuitisation rules that apply to members of pension funds, pension preservation funds and retirement annuity funds, to be applied to members of provident funds and provident preservation funds, after 1 March 2021 (T Day).

However, the legislation protects the accrued rights of provident fund and provident preservation fund (“these funds”) members as at T day. This means that:

  • on retirement, members of these funds who are under age 55 on T day, will still be permitted to take amounts which accrued before T day plus fund return in cash.
  • Members over age 55 on T day will have access to all amounts in the fund in cash on retirement from that fund.
  • This is referred to herein as “vested benefits”.
  • Amounts that are subject to the annuitisation rules will be termed “non-vested benefits” .
  • The vested benefit rules have been extended to provident preservation funds of which the member had membership on 1 March 2021.

The annuitisation rules will apply to the non-vested benefits of all pre-retirement funds going forward. Fund administrators will have to keep separate records of amounts in funds which apply to the vested benefits and non-vested benefits which emanated from “these funds” as at T day. This will not only be required in “these funds”, but will apply to all funds. When members of “these funds” transfer benefits to other approved funds, records of the vested benefits will need to be kept in the new fund and administrators will need to keep separate records of vested and non-vested benefits. This will be explained herein.

Therefore, the legislative changes which defines vested and non-vested benefits appear in the definition section of each type of retirement fund and not just in the definitions of “these funds”.


Jenny Gordon

Understanding the legislative framework relating to vested rights

An important distinction is made in the legislation between members of “these funds” who are under age 55 on T day (“ under 55”) and those who are age 55 and over on T day (“over 55”).

***In all cases, the determining factor will be if a member had membership of one or more of these funds on T day.***

Members of “these funds” have been entitled to retire from age 55 with a full cash lump sum. Therefore members over 55 are given greater vested benefits than members who have not yet reached age 55 on T day.

  1. Members age 55 and older on T day

For members over 55 on T day, their vested benefits will be:

  • • All contributions to a provident fund and transfers to a provident preservation fund of which they were a member on T day, both on and after T day.
  • • Any amount credited to the member’s account on and after T day
  • • Any fund return on the above

This means that the vested benefits of members over 55 include amounts at T day as well as amounts contributed after T day and any amounts, including fund return, credited to the Page 2 members account after T day. The full value at date of retirement will be vested benefits. This applies in the provident fund they were members of on T day

Example: On T day value of member’s account is R 5 million. On date of retirement the value has grown to R 6 million. Between T day and date of retirement, the member contributed contributions of R500 000 and with growth is R1million. Member retires on 1 March 2025

The member may take R7 million in cash on retirement. No annuitisation is required.


Transfers to other approved funds (over 55)

On transfer to another approved fund, all amounts at date of transfer plus fund return on the transfer value in the new fund going forward will be vested benefits.

However, new contributions and fund credits plus fund return thereon in the new fund, will be non-vested benefits.

This applies to voluntary transfers as well as to compulsory transfers in terms of section 14. A section 14 transfer can occur when a section 197 transfer takes place as well as when a stand alone fund seeks to consolidate in an umbrella fund. Contributions which would have been vested benefits in the transferring fund, no longer qualify in the new fund.

Example: On T day, the value of the member’s account in a provident fund is R 5 million. Contributions after T day are R100 000 .On date of transfer to a pension fund, with fund return, the vested benefit is R 6200 000. On transfer to the Pension fund, R6 200 000 plus all future fund return on that amount will be vested benefits. If the member makes contributions to the new fund, those contributions plus fund return will be non-vested benefits.


Lump sum disability benefits (over 55)

If the member is in a provident fund on T day, all amounts which are contributed or accrue to the fund after T day are vested benefits. Therefore a lump sum disability benefit will be part of the vested benefits in the provident fund of which the member had membership on T day.

If the member were to transfer to a new approved fund after T- day, a disability benefit which pays out in the new fund, will be non-vested benefits.

  1. Members under age 55 on T-day

For members under 55 on T day, their vested benefits will be:

  • • all contributions made, prior to T day, to a provident fund; or transfers to a provident preservation fund, of which they were a member on T day;
  • • with the addition of any amounts credited to the fund-up to T-day
  • • and any fund return on the above amounts

This means that the fund value on T day plus all future growth on that fund value going forward will be vested benefits and the member will always be entitled to that portion as a lump sum.

All contributions made to a provident fund of membership after T day plus any fund return or credits after T-day, will be non-vested, and on retirement will be subject to the annuitisation rules.

Example: On T day, the value of the member’s account is R 5 million. On date of retirement the value has grown to R6 million. Member retires on 1 March 2025. Between T day and date of retirement the member contributed contributions of R500 000 and with growth is R1.2 million.

On retirement the member may take R6 million +1/3 of R1.2million as a lump sum, R800 000 must purchase an annuity.


De minimis amount of R247 000

The legislation provides that at least 2/3 of the value on retirement (less the vested portion) must purchase an annuity unless the value does not exceed R247 500.

Example: On T day value of member’s account is R 5 million. On date of retirement the value has grown to R6 million. Member retires on 1 March 2025. Between T day and date of retirement the member contributed R 150 000 and growth was R90 000 = R240 000, then the full fund value including the vested portion may be taken in cash on retirement and no amount would have to purchase an annuity. R 6 million + R240 000 = R 6240 000 can be taken in cash.


Transfers to another approved fund

Vested benefits and non- vested benefits that are transferred by a provident fund member or provident preservation fund member to any other retirement fund after T-Day (excluding the GEPF) must retain their vested and non-vested nature in that new retirement fund. This general rule is also true for any of those vested benefits and non-vested benefits that may be transferred to successive retirement funds. Vested and non-vested benefits will retain their nature irrespective of how many times they are subsequently transferred to other transferee retirement funds and irrespective of the type of retirement fund they are transferred to.

Example: On T day, the value of the member’s account in a provident fund is R 5 million.(vested benefit) Contributions after T day are R100 000 (non-vested) On date of transfer to a pension fund, with fund return, the vested benefit is R6 million. The non-vested benefits of post T day contributions plus fund return is R200 000.On transfer to the Pension fund, R6 million plus all future fund return on that amount will be vested benefits. The R200 000 and all future fund return on that will be non-vested benefits. All future contributions plus fund return thereon in the pension fund will be non-vested benefits


Deductions under the Pension Funds Act

The legislation provides for amounts which are permitted to be deducted in terms of the Pension Funds Act to be deducted proportionately from the vested benefit and the non-vested benefit. Examples of these deductions are housing loans, divorce orders and damages claim to employers.

For example, a divorce award to a non-member spouse will reduce the member’s vested and non-vested benefit proportionately where there is both a vested benefit and a non-vested benefit in the fund.


Transfer of divorce award to non-member spouse approved fund

Although a divorce award will reduce a member’s fund proportionately, the vested benefit is not extended to a fund of a non-member spouse. If a non-member spouse elects transfer of a divorce award to an approved fund, it will all be a fully non-vested benefit.


Part Withdrawals

On leaving employment a member may elect to take a lump sum in cash and transfer the balance to a new employer fund; to a preservation fund; or to a retirement annuity fund. There has been some debate as to whether this type of partial withdrawal is permitted to be deducted proportionately from the vested benefit and non-vested benefit. Every fund is a pension fund approved under the Pension Funds Act and therefore the legislation is capable Page 4 of being interpreted to extend to pre- retirement part withdrawals. The regulators are examining this point. Unless we receive an indication that this is contrary to National Treasury policy, we shall be interpreting a pre- retirement part withdrawal to be withdrawn proportionately from the vested benefit and non-vested benefit.


February 2021 contributions to funds which are paid later than 1 March 2021

Due to the way in which the legislation is worded, it has been a point of uncertainty, whether contributions of members which are due in February 2021 or earlier and which are paid to the provident fund by employers later than 1 March 2021, will be included in the vested benefits of members under 55. At National Treasury hearings on the Taxation Laws Amendment bill, SARS was of the view that they qualified as contributions prior to 1 March 2021. We will monitor whether there are any communications from the regulators to the contrary.


Lump sum disability benefits under 55

Only amounts which have accrued before T day fall into vested benefits. Therefore if a member is disabled after T day, the lump sum disability benefit payable to the fund will not fall into the vested benefits. The payment will fall into non-vested benefits.


Net contribution

The legislation states that any amount contributed to a provident fund or provident preservation fund forms part of vested benefits. However, amounts contributed to funds include risk benefits as well as charges. We are of the view that the intention of the legislation is that only the contribution allocated to retirement funding should be vested benefits and we are interpreting and applying it accordingly.


Transfers within the same fund.

Where a member has membership of an umbrella provident fund on T day, whether over or under 55, and later leaves an employer and becomes employed by an employer who participates in the same umbrella fund, that member’s vested and non-vested benefits will not change at all. The member has changed employers but is still a member of the same retirement fund.


Tax free transfer between funds

Since members of provident funds will be required to annuitise retirement benefits going forward, subject to the vested benefits, there is no need to disincentivise pension to provident fund transfers or pension preservation fund to provident fund or provident preservation fund transfers. With effect from 1 March 2021, transfers from pension and pension preservation funds to provident and provident preservation funds may be effected without paying tax.


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From compliance to the metaverse: Investment trends to look out for during the year ahead




By Rami Cassis, Founder and CEO of Parabellum Investments


In the investment world, the old saying, knowledge is power, has never been more pertinent. As any investor will testify, it is essential to retain an in-depth, and up to date, understanding of news, predictions and trends that specifically relates to his or her specific area of interest.

This is particularly true for investors in the financial sector.

We all know just how quickly the sector can change beyond recognition. The demands of consumers are forever changing, new technology is always waiting in the wings to re-write the financial status quo and the next big digital company is constantly looking to increase its market share. There is always a new trend to look out for.

As we move into a brand-new year and prepare to face the opportunities – and challenges – that doubtless lie ahead, these are some of the trends that are likely to develop during the next 12 months.


Personal banking conversations

In its Tech Trends 2021: A financial services perspective Deloitte states that today’s pioneering companies are using advanced digital technologies, virtualized data, and cobots to transform supply chain cost centres into customer-focused, value-driving networks, based around a personal experience.

The concept of personal banking provides a perfect example of how the financial services sector has evolved to deliver digital personal banking.

Before the digital banking revolution, personal banking involved a visit to a high street branch to sit down with a personal banker in the flesh. This personal banker would be the customer-facing, end point of a complex supply-chain, involving training centres, degree courses, carbon-emitting journeys into work – the list goes on.

Compare this to the current version of personal banking. Digital financial services firms such as Monzo have revolutionised banking thanks to sophisticated analytics and a personalised interface. The big banks are now catching up, offering their own versions of ‘modern’ banking insights for the everyday user, and furnishing them with the latest online, smartphone-powered gadgets to enable them to manage their money 24/7, wherever they might be in the world.

However, even this is now becoming somewhat stale, with many financial services providers still seeing personalization simply in terms of personalized messages. Instead, the next chapter will involve smart banks understanding that good personalization requires personalized conversations, not just messages.

Enterprise software is one of the specific investment interests of Parabellum Investments. One of our portfolio companies is ieDigital, a specialist UK financial technology provider. The team from ieDigital and Parabellum Investments analyses the latest developments in business technology regularly.

We understand the importance of pushing digital boundaries. Indeed, one eye should constantly be scanning the horizon to identify the digital tools that the customers of tomorrow will expect. The interpretation of digital transformation is specific to each organisation and translating technology into practical business outcomes requires the focused specialism the combined IE Digital & Parabellum Investments team is qualified to deliver.

We understand – and see daily – the pressure that banks are coming under to deliver an ever more personal service, and see the ability to deliver these personal conversations is one of the trends to watch during the next 12 months.


The metaverse

The word ‘metaverse’, is defined in the Oxford English Dictionary as a “virtual-reality space in which users can interact with a computer-generated environment and other users”.

When Facebook changed its name to Meta in 2021 it may have come as a surprise to many of the platform’s users, but it was a major moment in the company’s history. It signalled Mark Zuckerberg’s ambitions for his business; to be the leader in the development of the metaverse.

Indeed, the future of the metaverse is looking sophisticated and bright. With giants like Facebook and Microsoft introducing metaverse elements into the fabric of their business models, it’s a concept that cannot be ignored, and one which is likely to expand rapidly throughout the next 12 months.

Returning to the financial services sector as an example, in a blog post titled Metaverse, the end of banking digital transformation?, CoinYuppie speculates that the metaverse will change banking in a number of ways including:

  • Identify verification. In the metaverse, identity verification will be performed via VR glasses and Metaverse sensor devices which contain a security chip.
  • Real-time creation of financial products. In the meta universe, virtual product managers use gestures to drag and drop the entire process of digital product manufacturing.
  • Games and attractions become a source of bank traffic. You can open branches on Mount Everest, in the Tarim Basin, on the Kunlun Mountains, or in Jiuzhaigou. The bank will combine these magnificent landmarks to fully personalize its branches and display its products.

This is just the financial services sector. Just imagine the opportunities for other industries – and the tools that will be needed to deliver them.

People are likely to need virtual-reality headsets, for example, together with related components such as sensors, as virtual-reality technology becomes intrinsically linked with the metaverse world.



Another key trend to look out for as we move into 2022 and beyond is how companies deal with their compliance issues.

In the wake of the global Covid pandemic, we are seeing a much-increased hybrid working model, with a large proportion of the workforce now based at home. This creates a logistical headache for compliance teams, who must now ensure that sensitive data and company secrets remain just that, despite a workforce now using multiple digital platforms, messaging systems, mobile phones and landlines.

Cloud-based archive systems that can capture multi modal communications are likely to become essential for companies to remain compliant.


Alternative currencies

Cryptocurrencies are likely to retain their position as one of the most talked about developments in the world of alternative currencies.

As an example, Bitcoin has risen nearly 70% since the start of 2021, driving the entire crypto market to a combined $2 trillion in value. However, heightened regulatory scrutiny and intense price fluctuations have somewhat dampened bitcoin’s prospects in recent months.

Despite this, we are likely to see banks increasingly looking at offering mainstream crypto services. We have already seen the start of this, with the first major crypto company going public with the debut of Coinbase in April, increased participation from Wall Street banks like Goldman Sachs, and the approval of the first U.S. exchange-traded fund linked to bitcoin.



We all know how quickly the financial sector changes. If you happen to be reading this just a few months after it was written, several of my points might now be in the mainstream – or they might be completely obsolete.

The fact is that unless an investor possesses superhuman powers, it is impossible to identify, with 100 per cent accuracy, what the next big investment trend is. All we can do is use our experience, insights, and up-to-date sector knowledge to predict what the next big trends are likely to be.


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How Crypto Traders Can Avoid Unexpected Expenses




Have you been dabbling in cryptocurrency in 2021? Are you still relatively new to the world of crypto and feeling your way around? While crypto can prove to be quite lucrative, it can also spark a lot of unexpected expenses if you aren’t careful and don’t use the proper tips. We’ve got four essential ways tips crypto traders can use to avoid unexpected expenses moving forward, making sure your experience with crypto is as positive as possible.


Make Sure You’re Working with a Strategy

When you get into cryptocurrency, it’s wise to look at it as you would any other type of investment. This means you have a plan and a goal of what you want to achieve. You also need to ask yourself how much of a risk you are willing to take. The answer will be different for each person, so don’t feel pressured to keep up with others. In general, cryptocurrency trading is seen as a high-risk activity, so you need to accept that going into it.


Diversification Can Help Limit Expenses

Any financial investment expert will tell you that diversification is an excellent way to balance your options and hopefully prevent any massive losses – or unexpected expenses. You can use this approach with cryptocurrency and make sure you’re diversifying.


Understand the Tax Laws and How They Apply to Crypto Investments

Did you know that you may be subject to paying taxes on your crypto assets? It’s something that isn’t always discussed, nor do all investors realise that this is the case. Cryptocurrency tax UK can be confusing and not something you want to glaze over.

Because you may face some crypto tax issues, it’s worth it to work with a company like Hodge Bakshi, which is a group of chartered tax advisors and chartered accountants. They are well versed in how individuals are taxed, what the code says, asset pools, capital gains tax and more. They can guide you through the process so there is no chance of an unpleasant surprise.


Keep An Eye Open for Cryptocurrency Scams

Unfortunately, scams are now popping up all over the place and if you get caught up in one, it can end up costing you money. There are business and investment cryptocurrency scams to be on the watch for. A popular one is where you are told to get others involved, like a rewards programme. So, the more people you manage to recruit into the programme, the more money you will make. This should be a huge red flag; you don’t want to get involved in any of these.

Another popular scam is the promise to convert your bitcoin to cash, which can result in you losing your money. Remember the saying – if it’s too good to be true, then it probably is. In other words, be sceptical and don’t get pulled into anything.

While it’s impossible to anticipate every possible scenario, these tips can help you to avoid unexpected expenses or at least limit their negative effects.


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