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RUDI ASKS :
According to my home loan agreement, I still owe R250 000 on my bond. However, through the years, I have deposited an amount up to R250 000 in my access bond. Therefore, I have the same amount in my access bond as what I owe the bank. What will happen to my bond and monthly repayment? Should I contact the bank and instruct them to have my bond paid up?
CITY PRESS REPLIES:
It is very important to speak to your bank about your various options. You should confirm whether the R250 000 outstanding balance already includes the additional funds you have paid. This can be confusing, depending on how the bank illustrates these figures.
There is no benefit to having a credit balance (where you deposit more than you owe) on your home loan, as you do not earn any interest on the funds.
It is important to inform the bank as to what you want to do. If your home loan agreement still has several years left, then you can leave the credit facility open.
This means that you can still access the R250 000 of additional funds you have paid in. Keep in mind that access to the R250 000 will reduce in line with the term of the loan so that it is zero by the time your home loan agreement comes to an end.
If you have no funds owing, there will be no interest paid, but there will be a monthly service fee of around R69. If, however, you draw down on the access bond, your instalments will resume.
READ: Personal Finance | Does it make sense to use my bond to pay for my car?
If you are simply paying off the home loan and not cancelling, no notice is required. If, however, you wish to cancel the bond, then you will be required to give the bank 90 days’ notice of your intention.
The bank will then assist you through the cancellation process, which involves providing final settlement figures as well as consulting with bond cancellation attorneys, as the bond needs to be cancelled in the deeds office.
If you are cancelling the bond, your attorney will work with the bank to return your title deed to you. Attorney fees will apply.
If you cancel the home loan, your title deed will be returned to you and the home loan credit facility closed.
If you ever wanted to take out another bond on the property, you would have to reapply and register for a new home loan, with all the associated costs.
AM I BEING TAXED TWICE?
SHIVI ASKS:I would like to understand why I am being taxed on my payslip and again in my tax return.I earn a monthly salary which is taxed each month. However, I also receive a monthly amount of R14 000 which is from my late father’s retirement policy. Both my salary, and the R14 000 are taxed before I am paid. However, the SA Revenue Service (Sars) says I owe R45 000 in tax.
I was advised that this was because the monthly amount of R14 000 puts me in a different salary bracket. Does this not mean that I am being taxed twice?
CITY PRESS REPLIES:
This is a common problem that people with multiple incomes experience, and it is due to the different tax brackets. South Africa has a progressive tax system in which, the more you earn, the higher the percentage of tax you pay.When the retirement fund pays out the R14 000 per month, they have no additional information regarding your other sources of income.
Therefore, they base the tax rate on a person earning R14 000 a month (R168 000 a year). Based on current tax tables, that income would fall into the 18% tax bracket.Your employer would tax your salary based on the assumption that it is your only income. If, as an example, your salary was R30 000 a month (R360 000 a year), you would fall into the 26% tax bracket and your tax would be calculated accordingly.
However, if you add the two incomes together, you effectively have a total income of R528 000 which puts you in the 36% tax bracket.
Sars would now calculate your taxable income based on this tax rate, which would be higher than the tax you paid on your salary and your father’s pension.
WHO WILL RECEIVE MY PENSION?
OSE ASKS: I am a member of the Government Employees’ Pension Fund (GEPF). I am about to retire and I would like to know what happens to my pension when I die. I have no spouse and all my children are over the age of 23. Will they receive the payout as listed in the nomination form?
City Press replies: Once you retire you receive a gratuity paid as a lump sum and a monthly annuity income for the rest of your life. The annuity is guaranteed for 60 months after retirement. This means, if the member passes away within the first five years of retirement, the beneficiaries will receive the balance of the monthly GEPF pension payments up to the end of the five-year period, paid as a lump sum. This would be paid according to the nomination form. For example, if the member died 24 months after retirement and was receiving an income of R20 000 per month, the remaining 36 months would be paid as a lump sum of R720 000 (R20 000 x 36) to your beneficiaries.
READ: Can we access the funds in our bond?
However, after five years, no funds are paid to beneficiaries apart from the spousal pension. (If you were married, your spouse would continue to receive a monthly spouse’s pension.)The only exception would be if the retiree had a minor child, who would qualify for a child pension until he or she reached the age of 22.The only way to leave retirement funds to other beneficiaries, such as adult children, would be to invest the gratuity you receive at retirement.For example, if you received R500 000 as your lump-sum benefit and invested it for 20 years with an average return of 4% above inflation, it would be worth R1.1 million in today’s value.
