TAXATION OF BENEFITS
If you leave office and take benefits before age 50 (except if you retire early because of ill health), your benefits will be paid to you in the form of a resignation benefit. Similarly, even if you are 50 or over when you leave office, you have the right (at any age) to choose to take your benefits in the form of a resignation benefit, instead of a retirement benefit.
What is the resignation benefit provided by the Fund?
On resignation, you will receive your FUND CREDIT, as explained earlier in this section. The tax treatment of this benefit is dealt with in the section of this guide titled “Taxation of Benefits”. (There may also be additional gratuity amounts paid by your legislature, as discussed in the sections below – we will not deal with these here.)
What options do I have in respect of my resignation benefit?
You have the following options in respect of the resignation benefit:
- You can choose to receive your entire benefit as a cash lump sum (subject to tax);
- You can preserve your benefit for your later retirement - i.e. transfer your Fund Credit to an approved Preservation Pension Fund,Retirement Annuity Fund, or your new employer’s pension fund;
- You can choose to leave your Fund Credit in the Political Office-Bearers Pension Fund – in other words you choose to become what is called a “deferred beneficiary” of the Fund. In this case you will only be able to receive a benefit once you retire, at age 50 or older. At retirement you will then become entitled to your full Fund Credit at that time.
Note: This option is not available to you if you have a housing loan (bond) in respect of which the Fund has to honour a guarantee given to the mortgage lender (the bank).
The issues to consider in deciding what to do with your resignation benefit are quite complex. The next section deals with these options in more detail.
In providing the material that follows, the Fund has tried to reflect the tax treatment of contributions and benefits accurately at the time of writing, but the Income Tax Act is very complicated and is subject to regular changes. In the event that the following material conflicts with the Income Tax Act, the Act will apply. Because the Income Tax Act is so complicated, it is very important that you seek specialist advice if you have questions about taxation of your retirement benefits and when you have to make decisions, for instance about the form of the benefit that you take after you leave office.