Question:
I am 54 years old and have two retirement annuities with maturity dates at age 55.

Can I access the funds at age 55 even if I continue to work (i.e. stay employed)?

Answer:
We have had many questions around the various aspects of the different types of retirement vehicles. For purposes of your question, we need to look at the essentials of a retirement annuity (RA) fund.

Pension and provident funds are set up by employers for their employees and an employer/employee relationship is a requirement to belonging to such a fund. Membership is also compulsory for all employees.

A retirement annuity, on the other hand, is a voluntary retirement savings vehicle and anyone can apply to become a member of a retirement annuity fund. Such an application is usually made through an insurer or other product provider, but the individual becomes a member of the RA fund, pays the contributions and is entitled to benefits upon retirement. As you can see, there is no mention of any employer as there is no employer/employee relationship in the context of a RA.

As discussed last week in 'RAs — SARS owes you', there is a tax concession available for contributions to a RA fund. Legislation does, however, limit access to the accumulated funds before age 55. Benefits may only be accessed before age 55 if:

  • the member dies

  • the member becomes disabled

  • the member formally emigrates

  • the accumulated value does not exceed R7000.

In practice, a retirement annuity is generally sold to an individual with a specific term attached (i.e. the person is committing to paying premiums until a certain age, obviously at least age 55). If the investment was a once-off lump sum amount into an RA, the maturity age will normally be 55. Some product providers also have open-ended RAs where the member may choose to access the RA benefit at any age he elects after age 55 — there is no contracted maturity date.

To get back to your question: based on the information provided, you will be able to access your accumulated benefit as a retirement benefit as soon as you turn 55. As an employer/employee relationship is irrelevant, whether or not you stay employed will have no bearing at all on accessing your RA benefits.

You will have the option on both the RAs to receive up to 1/3 of the benefit as a lump sum (subject to taxation) while the remaining 2/3 will have to be used to purchase a compulsory annuity. Please read 'Retiring soon?', an article discussing the different compulsory annuity options. If the total benefit per RA fund does not exceed R75 000, you may choose to receive the full benefit as a lump sum.

Before making a decision about accessing your accumulated funds, I would strongly suggest that you to consult a Certified Financial Planner to assist you in putting together a holistic financial plan. Such a plan would seek to accommodate all your needs and goals both now and into retirement and a qualified financial planner will be best positioned to advise you on the options with regards to the two RAs.

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