The good and bad

Finweek English Edition - - Cover Story -

a tax-free lump sum and the re­main­ing two-thirds must be pre­served (an­nui­tised).

Cosatu has pre­vi­ously stated that no gov­ern­ment has a right to uni­lat­er­ally de­cide for work­ers how and when to spend their re­tire­ment sav­ings.

If the amend­ment is even­tu­ally im­ple­mented, the re­quire­ment to pur­chase an an­nu­ity on re­tire­ment will ap­ply to all mem­bers, in­clud­ing those be­long­ing to pen­sion, prov­i­dent and re­tire­ment an­nu­ity funds.

Trea­sury also pro­posed re­mov­ing the 12-month lim­i­ta­tion on join­ing newly es­tab­lished pen­sion or prov­i­dent funds in the lat­est draft bill.

The In­come Tax Act cur­rently states that if an em­ployer es­tab­lishes a new pen­sion or prov­i­dent fund, em­ploy­ees have up to 12 months to join the fund. An em­ployee who fails to join within this pe­riod is not per­mit­ted to join that fund.

Trea­sury says this is re­stric­tive and cre­ates pol­icy anom­alies. “The con­se­quence of the cur­rent limit of a 12-month pe­riod may be that em­ploy­ees can opt to be out­side of the re­tire­ment sav­ing sys­tem even though they are cur­rently em­ployed.”

It is pro­posed that em­ploy­ees should be al­lowed to join a newly es­tab­lished pen­sion or prov­i­dent fund at any time, sub­ject to the rules of the fund. In­ter­ested par­ties have only un­til 18 Au­gust to com­ment on the pro­posed changes an­nounced in the draft bill. ■

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