How does the retirement process take place?

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14 January 2022
Employer pension and provident funds (employer retirement funds) differ from retirement annuities and preservation funds in the way that they process retiring members.

The principles are the same, but the employer retirement funds tend to have more formal processes. In this article we detail the employer processes first and then discuss the practical differences as they relate to retirement annuities and preservation funds.

The first step is for the employer retirement fund to notify members of when they are scheduled to retire. This needs to be done at least six months before their retirement date. Retirement dates are usually at the end of the month in which they reach their retirement age. Some employers arrange for employees to retire at the end of December, in their retirement year, regardless of the month in which their birthday takes place. Employers often make arrangements for individuals to stay and finish project commitments, but then usually as a contractor.

Retirement notifications have a number of elements, set out below:

Members must then:

Retirement annuities and preservation funds are exempted from some of these conditions, so members need to be careful with them as well.

It is very necessary for members to make sure that they give both postal and residential addresses, as well as email addresses, when completing forms for their pension. Administrators making life annuity payments will need pensioners to prove that they are still alive by completing a certificate of existence every year. This means that these administrators need to be notified of every address change a member makes, in order for them to be able to send members correspondence. If the address is wrong, the letter asking for the certificate of existence cannot be sent to the pensioner who, in turn, cannot respond. This often results in pensions being stopped because the administrators make the automatic assumption that the member has passed away. The fund is therefore closed after three months of no communication. When this happens, and the member eventually comes forward, the whole identification and FICA process must be redone.

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