What Is The 1 3 Rule For GEPF?

What Is The 1 3 Rule For GEPF?

The 1/3 Rule for the Government Employees Pension Fund limits how much of your pension you can take as a lump sum when you retire. It allows you to withdraw up to one-third of your pension savings as a cash lump sum, giving you access to a portion of your money immediately.

The remaining two-thirds have to be used to buy a monthly annuity, which provides you with a steady income for the rest of your life. This setup ensures you will have ongoing financial support throughout retirement, rather than just a one-time payout.

The idea behind this rule is to help retirees manage their money wisely. Limiting the lump sum withdrawal prevents people from spending their entire pension too quickly. Instead, the rule encourages long-term financial stability, making sure retirees have enough money to live on for the years ahead.

State the 1 3 GEPF Rule

The 1/3 Rule for the Government Employees Pension Fund (GEPF) lets members withdraw up to one-third of their total pension as a lump sum when they retire. The remaining two-thirds must be used to buy a monthly annuity, which provides a steady income for the rest of their lives.

GEPF Two-Pot Retirement System

The Two-Pot Retirement System allows members of a retirement fund to access part of their savings before they retire in case of emergencies. The majority of their savings, however, will remain preserved until retirement. This system applies to South Africans with a pension fund, provident fund, retirement annuity, or preservation fund.

Under this system, members’ benefits are divided into two “pots”: a savings pot and a retirement pot. Contributions to the savings pot can be accessed once a year, provided the balance is at least R2,000 and any withdrawals are taxed at the member’s marginal tax rate. It is important to note that using the savings pot will reduce pensionable service.

The retirement pot is designed for long-term financial security, with no access allowed before retirement or death. The funds in this pot will be used to provide a regular pension at retirement. However, if the balance is R165,000 or less, the member can withdraw it as a lump sum. If a member emigrates, they must wait three years to access their retirement pot. Withdrawals from this pot will be taxed based on retirement tax rates.

Things to Consider Before Withdrawing Your Pension Savings Under The Two-Pot Retirement System

The new system aims to improve retirement outcomes while allowing members to access a portion of their savings before retirement. This is especially helpful for government employees who may feel forced to resign just to access their pension during financial difficulties. With the Two-Pot System, members can withdraw from their savings once a year, providing relief without risking unemployment.

However, it is important to note that withdrawing from the savings pot will reduce your gratuity at retirement, and the amount withdrawn will be taxed as part of your income. Because of this, early withdrawals should only be considered if you are facing a serious financial crisis.

Ideally, pension savings should be preserved for long-term security, and accessing these funds prematurely could impact your retirement.

CONTACT GEPF

Toll-free number: 08 00 117 669
Fax: 012 326 2507

enquiries@gepf.co.za

Postal Address
GEPF Private Bag X63,
Pretoria,
0001

For more information, visit the official website of the Government Employees Pension Fund. I hope the provided information is helpful, share your thoughts below in the comment section.