Finweek English Edition - - INSIGHT -

treat­ment of re­tire­ment sav­ings i s based on dif­fer­en­ti­at­ing be­tween re­tire­ment fund­ing in­come, the in­come on which a worker’s pen­sion or prov­i­dent fund con­tri­bu­tion is cal­cu­lated such as their ba­sic salary, and non-re­tire­ment fund­ing in­come, such as over­time, thir­teenth cheques or bonuses.

A tax­payer may deduct pen­sion fund con­tri­bu­tions of as much as 7.5% of her re­tire­ment fund­ing in­come from tax­able in­come ev­ery year and re­tire­ment an­nu­ity con­tri­bu­tions of as much as 15% of their non­re­tire­ment fund­ing in­come ev­ery year. Prov­i­dent funds don’t at­tract any tax de­ductibil­ity, but pay­outs aren’t taxed.

A mem­ber of a pen­sion fund or re­tire­ment an­nu­ity can take one third of their cap­i­tal at re­tire­ment or age 55, which­ever is the ear­li­est, and must invest the sur­plus in an an­nu­ity. Prov­i­dent fund mem­bers can take all their cap­i­tal at re­tire­ment.

Fol­low­ing the re­forms, prov­i­dent fund mem­bers will be treated the same as pen­sion fund and re­tire­ment an­nu­ity fund mem­bers in that they will be forced to an­nui­tise two thirds of their cap­i­tal.

The re­forms will also see the scrap­ping of the dif­fer­ence be­tween re­tire­ment fund­ing and non-re­tire­ment fund­ing in­come, and tax­pay­ers will be al­lowed to deduct an amount of as much as 27.5% of tax­able in­come with a ceil­ing of R350 000 per year.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.