Last-minute changes to re­tire­ment re­form

CityPress - - Business - – Maya Fisher-French

On Thurs­day, Trea­sury an­nounced that cer­tain pro­vi­sions re­lat­ing to re­tire­ment re­form would not go ahead on March 1. The com­pul­sory an­nuiti­sa­tion (pur­chas­ing of in­come) of prov­i­dent funds on re­tire­ment will be post­poned un­til March 1 2018, and the abil­ity to trans­fer tax-free from a pen­sion fund to prov­i­dent fund will also be de­layed un­til then. How­ever, other pro­posed changes will go ahead:

The tax de­duc­tion for con­tri­bu­tions to all re­tire­ment funds (in­clud­ing prov­i­dent funds) will in­crease to 27.5% of tax­able in­come or re­mu­ner­a­tion – whichever is greater – up to a cap of R350 000 per year from March 1 2015.

As from March 1 2015, pen­sion fund mem­bers who have R247 500 or less on re­tire­ment will not be re­quired to pur­chase an an­nu­ity in­come on re­tire­ment and can take their full ben­e­fit as a lump sum. This has been in­creased from the cur­rent level of R75 000.

Mem­bers of pen­sion funds (not prov­i­dent fund mem­bers), such as pub­lic ser­vants who are mem­bers of the Govern­ment Em­ploy­ees’ Pen­sion Fund, have not been af­fected by the changes be­cause the rules of pen­sion funds con­tinue to ap­ply.

The rules of pen­sion funds have al­ways stated that, on re­tire­ment, one is re­quired to pur­chase an an­nu­ity in­come, there­fore mem­bers of pen­sion funds will still be re­quired, on re­tire­ment, to pur­chase an an­nu­ity in­come with two-thirds of their re­tire­ment fund.

As com­pul­sory preser­va­tion was never part of the pro­posed changes, mem­bers of pen­sion or prov­i­dent funds who re­sign will still be able to cash in all their sav­ings when they re­sign, sub­ject to cur­rent tax­a­tion laws.

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