October 2018

NFMW-greetings

We have noticed a concerning increase in the number of members wanting to resign or "end their membership" with the fund, because they have been declined a pension-backed home loan and/or want to access their retirement savings, mainly because of debt. The financial pressures that most South Africans are experiencing with the increased petrol price, the rising day-to-day cost of living and all the other pressing financial obligations are all contributing factors.

It is important to note that pension-backed home loans may only be used for home improvements and/or purchases. Accessing your retirement savings may seem as the obvious solution to your current financial problems, but this can have a detrimental impact on your long-term financial position.

In this edition we have included frequently asked questions received from members on this topic and the answers thereto, including important factors to consider. As always, you are welcome to contact us if you require further information or assistance with any fund-related matter.

Kind regards

Sean Samons <br />
Principal Executive Officer

FREQUENTLY ASKED Q&A - Housing loans and accessing retirement savings

Q: I am experiencing financial problems and need to borrow from my fund to settle some of my accounts. Please help!
A: In terms of the Pension Funds Act the fund is not allowed to grant personal loans to members and your fund credit can only be paid to you on ending service. The fund may only issue surety for housing loans through a specific provider and the loan must be used for housing purposes and is subject to approval. We can therefore not assist with settling personal debts as the main purpose of the fund is to help you save for retirement.

Q. I have applied for a pension-backed housing loan with the fund's service provider, but my application was declined. Why is this the case? Is it not my money?
A. The financial credit provider usually provides the reasons why the application was declined, which vary from affordability, a bad credit record, not servicing current debts and incomplete application forms. It is important to note that the financial credit provider has a legal obligation to grant loans within the specifications of the National Credit Act and can lose their licence if they grant loans to members who do not qualify within these set criteria.
For more information on why your loan was declined and possible rectifying measures that can assist in a future applications, please contact the financial credit provider.

Q. I want to end my membership with the fund and join another fund, because I was declined.
A. You can only end your membership if you are no longer employed at your municipality i.e. if you resign, are dismissed or if you retire. All other Local Government funds are also governed by the Pension Funds Act and their financial providers, who provide home loans, must also comply with the National Credit Act (NCA). Even if you join another fund, your application will also be declined, if you do not meet the criteria as set out in the NCA.

Q. I have no other option and must end service to access my retirement savings.
A. It is very important that you carefully consider the following factors;
Tax! - The benefit that is payable to you is subject to tax. If you are resigning only the first R25 000 is tax free, for example if your fund credit is R300 000 and you deduct the tax free amount of R25 000 = R275 000 is taxable at e.g.18% = R49 500 tax payable.
Loss of fixed income and benefits - If you end service, you will not receive the income or employer sponsored benefits i.e. medical aid, pension fund contributions you currently receive from your employer. With South Africa's unemployment rate of 27%, there is no guarantee that you will find other employment or that you will be able to replace your income.
Long-term negative impact - The benefit paid to you may solve your current financial problems, but in the long term it will have a negative impact on your savings towards retirement. You will have to start saving from scratch, again. This means you will need to save more every month than you would have saved had you not cashed in the savings, in order for you to get to the same targeted retirement income.

LATEST INVESTMENT PERFORMANCE

<hr /><h2>2017/2018 ANNUAL REPORT</h2>

The 2017/2018 Annual report will be posted to members at the end of November and members are encouraged to ensure that the fund has their correct address on record in order to receive their packs. An electronic version of the report will also be distributed as part of the next edition.