The government has delayed the implementation of a new tax law that would force South Africans to put two-thirds of their provident fund savings in a retirement annuity. The provision meant that retirees would be allowed to take only one-third in cash. They are currently entitled to the full amount.
According to a statement by the finance ministry on Thursday, the government has proposed that the annuitisation requirement for provident fund members be postponed for two years, to 1 March 2018.
“Government remains of the view that the principle of annuitisation is in the best interest of all members of retirement funds as it can alleviate old-age poverty,” the statement said.
The Congress of South African Trade Unions was opposed to the act, which President Jacob Zuma signed into law last year. It believes the law gives the government the right “to dictate to workers how and when they should access and spend their deferred salaries in the form of pensions.”
In the run-up to T-Day, as the new legislation was called, Derick Ferreira, senior product manager at Old Mutual, said he expected the tax law changes to lead to an “upsurge of interest in all savings vehicles this year” as investors and retirees consider options that offer them maximum tax concessions.