The Coronation Preservation Fund provides those who want to preserve the value of a retirement fund with a platform to grow their money further. The Coronation Preservation Fund can provide more value for clients, and clients can grow their money instead of having it saved. Inflation will be something that an investor will not worry about.
The Coronation preservation fund invests cash that is deposited into the preservation fund in one or more of the Coronation unit trusts. Coronation unit trusts are well known in South Africa and are some of the best-performing unit trusts. Clients can choose where to invest and what percentage of the contributions to invest in each unit trust.
An investment into the Coronation preservation fund is regulated by the Pension Funds Act number 24 of 1956. The act provides some restrictions on capital exposure, which must be adhered to when investing. Therefore, investment in the Coronation unit trusts will be limited by the provisions of the Pension Funds Act.
Money invested in the Coronation preservation fund comes with tax benefits. The money invested won’t be charged taxation. Furthermore, the proceeds from the investment will be tax-free, as a result, providing access to more income in retirement.
The Coronation Preservation Fund is one of the best preservation funds in South Africa. Before opening the account or depositing money into the account, you need to familiarise yourself with the product. Therefore, knowing what the product provides, what limitations it has, and how it works should be something known.
For more details on the Coronation preservation fund, read the discussion below.
Coronation preservation fund summary
The Coronation Preservation Fund is a fund that provides a platform to preserve funds from a pension fund or a provident fund. The Coronation Preservation Fund requires a lump-sum contribution of R50,000.00 to get started. The funds contributed can be invested in either the Coronation Preservation pension fund or the Coronation Preservation provident fund.
The product doesn’t have any initiation fees and there is no administration. Fees that are supposed to be charged by Coronation are subsidized by Coronation, which includes an administration fee of 0.20% plus VAT. The administration is for investment into the unit trusts that the preservation fund invests in.
Investors can invest in a number of CORONATION-based units trusts to grow their funds. Funds in the unit trusts are managed by investors and can move funds from one unit trust to another without incurring fees. There are 22 unit trusts that an investor can invest in. However, Coronation has highlighted 4 unit trusts for the preservation fund. Unit trusts recommended by Coronation include:
- Coronation strategic income fund,
- Coronation balanced defensive fund,
- Coronation capital plus fund, and
- Coronation balanced plus fund.
The Coronation Preservation Fund doesn’t allow the use of the fund as collateral. Therefore, creditors cannot attach the fund and liquidate it should an investor fail to make credit payments. The Coronation preservation fund will be available at retirement in full, including the proceeds from investment.
How the Coronation preservation fund works
The Coronation Preservation Fund requires an application, and the application can be done online or over the phone. When making an application, the applicant will be required to list the names of the beneficiaries of the account should the client die while the account is still active. Beneficiaries can be anyone that the applicant chooses.
The applicant will also have to choose the unit trusts where the funds will be placed. This comes with some restrictions as set by regulation 28 of the Pension Funds Act 24 of 1956. Regulation 28 limits investment in property and offshore investments by setting the limits of investment. The regulation will influence how much and where to invest most of the funds invested.
After choosing the unit trusts to invest in the application can then be sent for approval. If approved, the applicant can make a deposit into the Coronation preservation fund. Funds invested will be apportioned to the unit trusts as specified by the client. Switching an investment between unit trusts can be made at no additional cost.
The investor can withdraw once from the account before the retirement age of 55. A withdrawal made before the age of 55 will have tax implications and will be taxed according to the applicable tax table. Withdrawal at retirement doesn’t come with any taxes, therefore, the proceeds from the investment won’t be taxed.
Advantages of the Coronation Preserve Fund
- There is no capital gains tax, dividend tax, or income tax charged on proceeds at retirement.
- Regulation 28 provides a satisfactory level of safety for the capital invested by limiting investment exposure.
- The product cannot be used as security for personal loans. This product will still be intact even if creditors are owed.
- Lump-sum contribution to the account required is low as compared to other minimum contribution requirements by preservation funds in South Africa.
- There are different unit trusts to choose from.
- There is no initial fee or administration fee for the product.
Disadvantages of the Coronation Preservation Fund
- Capital can be lost when invested in unit trusts.
- There are taxes charged for withdrawals before the retirement age.
- Interest in the product is not guaranteed.
The Coronation preservation fund is mainly suitable for those that change jobs and have to move their provident fund or pension fund. The preservation fund can be used to counter inflation and grow the money invested until retirement. The amount of money available at retirement will be determined by how the investments have performed.
The retirement funds available won’t have to be taxed, and there is no administration fee that will be deducted. This gives the account holder a fair share of his or her investment.