Members of retirement funds transfer their accumulated savings from one provider to another for different reasons. Some people move their accumulated savings to a new employer when they change jobs, others change their retail preservation funds and sometimes a transfer is unavoidable because the Fund is moved to another for various reasons.
This is called a Section 14 transfer, and it is the legal process that must be followed to move money from one retirement fund to another, ensuring that no mistakes are made along the way. It can take months to complete.
You could be in the middle of a Section 14 transfer when the Two-Pot retirement system comes into effect on 1 September 2024 or find yourself having to transfer your accumulated retirement savings at a later stage. This article answers some questions you might have about how Section 14 transfers will work.
Can I execute a Section 14 transfer in the Two Pot Retirement system?
Yes, you can. However, note that Section 14 transfers can only be completed with all components clearly specified. Your retirement fund administrator will need to indicate the pot that holds each of the contributions i.e. the Vested Component, Savings Component and Retirement Component and they would need to be allocated to corresponding pots in the new fund, as follows:
- From the Vested Component in your old Fund to a Vested Component in your new employer Fund.
- From the Retirement Component in your old Fund to the Retirement Component in your new employer Fund.
- From the Savings Component in your old Fund to the Savings Component in your new employer Fund.
What will happen if my Section 14 transfer is still in progress by 1 September?
According to the Financial Sector Conduct Authority (FSCA), these are the rules that will govern Section 14 transfers that will be in progress on 1 September: For all transfers that straddle the implementation date and those that are still being considered for approval, the transferor Fund that has member assets as at 31 August 2024 must calculate the seed capital, irrespective of the status of the transfer. It must pay out savings withdrawal claims where it can.
You can approach the FSCA for an expedited Section 14 process if the transferor Fund will not be able to or would not be prepared to pay withdrawal claims within a reasonable time.
Will Tax Directives be required for Section 14 transfers?
Tax Directives will continue to be required for Section 14 transfers, with additional fields to demonstrate the values of the three components being transferred and to which component they are being transferred.