Retirement reform advertorial

2016-02-18 06:00

THE tides are changing in the retirement savings space, with National Treasury encouraging us to save more for retirement by significantly increasing the tax incentives. This is one of several important changes that will commence in March, now that President­ Jacob Zuma has approved the Taxation Laws Amendment Bill, 2015, which was passed by both houses of Parliament at the end of last year.

Gifts from Sars

The wait is over for retirement fund members, who will enjoy increased tax deductions from their contributions to retirement funds.

This includes provident funds, for which members were not previously able to claim a deduction.

The tax deduction of up to 27.5% of the greater of taxable income or employment income, subject to an annual ceiling of R350 000 will come into effect­.

Another change is that employers’ contributions to occupational pension and provident funds will be included in the gross income of employees as a fringe benefit. This means that employees will be able to treat those contributions as their own when calculating their tax deductions.

These deductions are subject to the limits mentioned above.

You will have to buy an income-providing product

Retirement funds will also be aligned, ironing out some of the differences between the different products. One of the key changes is around “annuitisation­” - the process of converting retirement savings into a stream of future income.

From 1 March provident fund members, like retirement annuity and pension fund members, will only be allowed­ to take one-third of their retirement savings as cash and will have to use the rest of their nest egg to buy a product that pays them an income during retirement.

Treasury has stressed that vested rights will be protected - i.e. the new rules will not apply to historic savings or growth on those contributions.

Unless you are about to turn 55

If a provident fund member is 55 or older on 1 March, the new requirement will not apply. Any accumulated retirement savings as at 1 March, as well as new contributions and growth after 1 March, can still be taken as a cash lump sum at retirement.

Or you have saved under R247 500

Members with a retirement benefit at retirement less that or equal to R247 500 will be allowed to withdraw the entire amount without the need to purchase an annuity, as from March. This is an increase on the current value of R75 000.

Contact your financial adviser and/or broker for further information. You could also contact me, East Coast Financial­ Services Pty (Ltd) on 083 399 3905 or my office on 032 944 3051 for an appointment.


The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licenced­ financial service provider.

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