PENSION FUND REFORM

THE Budget speech touched on the government's proposed “two-pot” system for retirement savings, saying more work needed to be done.

Michelle Acton, key account manager at Old Mutual Corporate Consultants, says the fact that the Minister has given the green light to the restructuring of the retirement system for individuals to allow for greater preservation and partial access to funds via the two-pot system is welcome.

“More detail is required in terms of understanding the parameters that would allow for early access. This will need to be provided in the draft legislation that will be published for comment towards the middle of the year,” she says.

Acton says more information on how National Treasury plans to tax contributions is also critical to reform. “Our current retirement fund tax dispensation is a significant incentive to encourage retirement savings, so we do not believe that this should be amended due to the proposed two-pot system.”

A change welcomed by the investment industry was the “harmonisation” of offshore investment limits across investment products.

Andrew Davison, head of advice at Old Mutual Corporate Consultants, says: “One of the unexpected but welcome changes in the Budget was the announcement that the offshore limit for all insurance, retirement and savings funds will be harmonised at 45%, inclusive of the 10% African allowance.

This implies that the current Regulation 28 offshore limit of 30% will increase to 35% with a further 10% in Africa outside South Africa. This will provide greater flexibility for retirement funds to access a wider set of opportunities for growth as well as diversification.

“The Minister also provided an update on the changes to Regulation 28 to enable greater investment in infrastructure by retirement funds with this expected to be gazetted into law by March.” |