Treasury proposes the taxman collects your retirement savings

The government wants to encourage you to save for retirement and it wants to reduce the costs on your savings. This week it presented new proposals to the industry on the various levels of saving, and it is thinking of involving the South African Revenue

National Treasury is considering establishing a retirement fund “exchange” to lower retirement funding costs and increase participation in the private retirement fund system. If accepted, employers will pay contributions, channelled through the South African Revenue Service (SARS), to a strictly controlled list of private sector retirement funds or a default government fund.

This new proposal formed part of a presentation by Treasury to senior executives of the retirement fund industry last week at a closed-door meeting between the Minister of Finance, Pravin Gordhan, and the industry. The presentation, which was obtained by Personal Finance, focused on retirement funding costs. Some aspects of Treasury’s work on costs have also been presented to trade unions.

Treasury said in a statement earlier this week that it will release a paper on the costs of retirement funding “shortly” and will give all stakeholders an opportunity to comment on and discuss the proposals.

The proposals will give members of funds provided by the retirement industry, particularly umbrella funds, more protection and choice as to how they would like their retirement savings invested.

The new proposed structure is modelled on KiwiSaver, the voluntary top-up scheme sponsored by the New Zealand government that sees contributions channelled through the office of the tax collector and then distributed to private sector