Five factors that can have a direct impact on a member's retirement savings

There are different factors that can have an impact on the benefits payable to a member on resignation and retirement. It is therefore important that members are made aware of these factors in order to assist them to make informed decisions about their retirement savings to ensure the best possible outcome.

1. Contributions made towards the fund
Member and employer contributions are fixed and calculated on the member's pensionable salary. Members have the option to make Additional Voluntary Contributions (AVCs) towards the fund to enhance their retirement savings. The monthly AVCs are deducted from the member's salary by the employer and paid to the fund and forms part of the member's fund credit to which monthly interest is allocated. The member determines the additional amount he/she would like to contribute extra every month and arranges the deduction directly with the municipality's salary department by completing the Additional Voluntary Contribution Instruction-form.

Did you know? Members can deduct up to 27,5% of the higher of their remuneration and taxable income, subject to a maximum of R350 000 per year, for both member and employer contributions.

2. Home loans
The fund issues surety for non-mortgage home loans through specific provider/s. Even though the member does not directly access his/her fund credit through these loans, any outstanding balance is deducted from the member's fund credit, on ending service. The higher the outstanding balance on these home loans, the lesser the benefit payable to the member.

3. Divorce order payments
When a member gets divorced and a compliant divorce order is received, instructing the fund to pay a divorce grant to the ex-spouse, the amount is deducted from the member's fund credit. The member usually loses a significant percentage of his/her retirement savings. In these instances, the member may consider making additional voluntary contributions to the fund and/or consider other investment vehicles, to make up for the loss in retirement savings, due to the divorce grant payment.

4. Risk cover options elected
The cost for the risk cover (death, disability and funeral) is deducted from the employer contributions. The higher the cover, the higher the risk cover cost deducted and the less savings towards retirement. It is therefore important that the risk cover option elected is best suited to the member's individual needs. The benefit brochures provides more information on the NFMW Risk Cover options and also shows you how to calculate the risk cover cost per month.

(Category A)

(Category C) 

5. Investment portfolio returns
The returns (positive or negative) are allocated to the member's fund credit every month. The percentage returns are determined by the investment portfolio that the member is invested in and it is therefore important to review the portfolio from time to time to ensure that it is still in line with the member's investment objectives.

Members are encouraged to always obtain independent financial advice when making own investment portfolio choices.