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Company provident fund vs self-insurance

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A Fin24 user wants to know what his rights are regarding a company provident fund or self-insurance. He writes:

What are my rights regarding a company provident fund or self-insurance?

I have been a consultant and contract worker for years, hence have my own retirement plans, disability and death.

Can the company "force" me to participate in the company scheme or can I elect not to subscribe?

Matthew Chapman of NFB Financial Services responds:

As a general rule, all permanent employees are obliged to join the employer provident fund.

This is due to current legislation, which makes membership of the fund compulsory and the employer would thus have to make it a condition of employment.

Failure to comply with this condition may result in the SA Revenue Service (Sars) withdrawing the tax approval of the fund and, therefore, losing the tax concessions that the employer and employee benefit from, when part of an approved retirement fund.

If, however, you were employed on a fixed term contractual basis and not as a permanent employee, you may in fact not be allowed to join the employer fund.

This would then allow you to continue, as you were, with your own retirement savings and risk provisions.

You should also be aware of whether the group life and disability cover at your new employer is approved or unapproved, as this will result in different tax treatments, both at contribution and payout stage.

Your best port of call would be your new employers' HR department to see what the current structure of the fund is and whether you have a specific pensionable salary as well as a "risk" salary.

This may allow for flexibility in terms of contributions to group life and disability cover.

- Fin24

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Dislcaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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