Retirement saving reforms on cards

2014-02-27 00:00

THE National Treasury, together with the ministers of Trade and Industry and Justice, will soon be taking action against abusive practices in the lending and debt collection businesses, Finance Minister Pravin Gordhan said yesterday.

He said some workers were taking home less than 25% of their monthly pay because of unscrupulous actions by debt collectors and irregular issuing of garnishee orders.

Many more people had access to credit these days, which was of benefit when productively used, but bad when used to fund excessive consumption.

“Cabinet has approved a number of measures to assist such households to reduce their debt burden, and stamp out the abusive and fraudulent activities of reckless lenders and unscrupulous debt collectors,” he said.

With regard to pension funds and encouraging people to invest in their future by saving more, he said there would be more pension fund reforms in the years ahead.

“Legislation has already been passed by Parliament to improve governance over pension and provident funds, and to align the rules and tax treatment of pension and provident funds, while at the same time protecting vested rights,” said Gordhan.

Consultations were under way with labour and business representatives on ways to cover six million employed people who do not have access to an employer-sponsored retirement plan.

“We intend to move progressively towards a mandatory system of retirement for all employed workers,” said Gordhan.

An agreement had also been reached between Treasury and the Association of Savings and Investment of South Africa on a way forward to reduce the level of charges for retirement savings products, and draft regulatory reforms would be published shortly.

According to the Budget Review, retirement savings reforms include changes to the taxation of contributions to retirement funds to provide additional relief for members and encourage them to save more.

Among these reforms are plans to make both employer and employee contributions taxable, up to a limit, for income tax purposes by the employee.

There are also changes to the retirement fund lump sum tax rates to avoid instances where lower income workers may be required to pay tax on their lump sum, even though they did not benefit from a deduction due to their taxable income falling below the tax-free threshold.

“Tax-preferred savings accounts”, first mooted in the 2012 Budget, would proceed as a measure to improve savings and these accounts would have an annual contribution limit of R30 000, to be increased regularly in line with inflation, to a lifetime contribution limit of R500 000.

On company car benefits, adjustments are being considered to treat employees who bear the costs relating to fuel and the upkeep of their company car, in a more equitable manner.

Measures to align the treatment of company car benefits for all employees include that actual retail market value of the vehicle be used in all cases, rather than currently, where, for example, vehicle manufacturers that import vehicles calculate the value of the fringe benefit at cost.

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions. publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24


How to open a beer bottle without an opener

Do the right thing and never be thirsty again…


You won't want to miss...

WATCH: Man films himself going down water slide upside down as things go very wrong…
WATCH: Conor McGregor: Notorious the trailer
Best date night restaurants in South Africa
WATCH: Ryan Reynolds offers fans a free tattoo in new Deadpool 2 teaser
Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.