WORTH THE WAIT?
broken into the pension changes — called P-Day — and the tax changes, called T-Day.
The recommendations for the stillto-be-set T-Day will affect the taxation of your retirement fund contributions. The recommendations change those made last year by former finance minister Pravin Gordhan, which were scheduled for implementation on March 1 2014. The latest recommendations are:
Your employer’s contributions will be added to your taxable income as a fringe benefit;
You will be able to deduct both your and your employer’s contributions to a pension fund, provident fund or retirement annuity (RA) fund up to 27.5% of the greater of remuneration or taxable income;
There will be a rand cap of R350,000 on the total amount you may deduct from your taxable earnings in any tax year;
Contributions in excess of the annual cap may be rolled over to future years when you may not reach the cap amount;
Any non-deductible contributions will be added to your tax-free lump sum at retirement; and
From T-Day, any new contributions made to a provident fund will be subject to the same annuitisation rules as pension funds, namely that at least two-thirds of the savings must be used to purchase a pension at retirement. Any provident fund savings made before T-Day, and any investment growth on those savings, will not be subject to the new pension purchase requirement.
The government is proposing tighter controls on preserving retirement savings, but it will allow you to access savings before retirement during periods of unemployment.
However, vested rights will be protected to avoid a repeat performance