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What is a Provident Fund

A provident fund is different to a pension fund, in that you are able to withdraw the entire savings amount as a lump sum when you retire. Government is intending to align the benefits of provident funds to those of pension and retirement annuity funds. This means that provident funds will ultimately be essentially identical to pension funds. The result is that you will only be able to withdraw a third of your provident fund savings as a lump sum upon retirement, while the rest has to be invested in an income annuity fund that pays you a monthly income. However, this legislation has not been applied, and has been postponed. For now, one can withdraw the entire amount. If you leave a company before you retire, example where you resign, you have the following options. Either you can keep the money in the fund if the fund allows it, or you can move your retirement savings out of the company fund. The destination options for the balance may be, your new company’s fund, a preservation fund, a retirement annuity fund or take a cash payout. Please note that the cash payout will be subject to tax on the lump sum tax table. The growth and income within your fund while you are a member of the fund is tax free. Tax is only payable when you access your funds as discussed above.