The good and bad
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. ■