Retirement savings: changes on the cards

The Budget Review indicates that the following amendments or regulations afffecting your retirement savings will also be considered in the year ahead:

◆ Allowing you to roll over contributions made before March 1 to a pension or retirement annuity fund that were not allowed for a tax deduction.

Steve Nathan, the chief executive officer of 10X Investments, says this means that any unclaimed contributions can be claimed as deductions, subject to the available limits in any tax year, despite the change in the tax deductions from March 1. You will not have to wait until you access these savings, on either retirement or withdrawal, to reap the tax benefits, he says.

◆ Allowing financial institutions to stay in breach of offshore limits as a result of the depreciation of the rand for a period of 12 months, but not to make any new offshore investments while they are in breach. This will prevent them from being forced to reduce your offshore exposure to comply with Regulation 28 of the Pension Funds Act at a time when this may not be to your best advantage.

Nathan says this will allay investor fears about reducing foreign holdings during this period of heightened currency volatility. A higher offshore allocation for the 12 months will reduce your exposure to the risks in South African markets.

◆ National Treasury intends to publish the final default regulations later this year. It says the key elements of these regulations include:

◆ Making it mandatory for you to join an employer’s retirement fund;

◆ Improving the disclosures retirement funds are obliged to make;

◆ Setting up good default investments and default annuities at retirement for fund members;

◆ Consolidating the number of funds to save on costs;

◆ Simplifying retirement savings products and enhancing competition by allowing you to move your savings between providers; and

◆ Ensuring that you get good advice and service from your fund.