Advertise Here
Icon

Directory

IconAssociations and Institutes
IconBBBEE Consulting and Verification Agencies
IconBenefit Administrators & Investment Managers
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconEmployee Benefits Consultants
IconFinancial Planners
IconIndependent Principal Officer
IconIndependent Trustees
IconOmbud
IconPension Fund Trustee Liability Insurance
IconPension Fund Trustee Training
IconPension Funds Adjudicator
IconPublications
IconRegulatory Authorities
IconRetirement Advice
IconRetirement Funds registered by the FSB
IconRetirement Products
IconSocial Grants (Government)
IconTrust Establishment & Management
IconWellness Programs
Image
  Subscribe To »

OLD MUTUAL CORPORATE WELCOMES RENEWED COMMITMENT TO ALIGN PENSION AND PROVIDENT FUNDS

Published

2020

Mon

02

Mar

South Africans urged to take advantage of tax reprieve to improve their retirement savings.

 

2 March 2020: The 2020/21 Budget provided a welcome surprise for embattled consumers as the Minister of Finance announced that personal income taxes would not be raised. Possibly even more valuable was the fact that Government demonstrated its willingness to do what is necessary and rein in expenses to tackle the country's growing fiscal deficit.

 

This is according to Malusi Ndlovu, Head of Old Mutual Corporate Consultants, who also welcomed the Minister of Finance's plan to proceed with the annuitisation of provident funds, set to take place by March 2021. "This decision to go ahead with reforms that began in 2016 but were placed on hold pending further negotiations at Nedlac underpins the State's commitment to providing adequate retirement provision to all working South Africans and addressing the potential long-term drag of ageing workers on the fiscus," says Ndlovu.

 

Despite the announcement during the Budget Speech of an increase in the limit on contributions to a Tax-free Savings Account from R33 000 to R36 000 per year, Ndlovu maintains that “retirement funds remain the most tax-efficient way to save for retirement with up to 27.5% of income allowed as a tax-deductible contribution, subject to an annual cap of R350 000. We hope members will take advantage of these various incentives to save more towards their retirement."

 

Annuitisation is the process that requires members to convert their retirement investment into a series of income payments at retirement. Ndlovu says that without the annuitisation requirementat retirement, many provident fund members could become dependent on the State or relatives in their retirement, despite having saved well throughout their working lives.

 

"Currently, as a result of the partial implementation of the so-called T-day reforms (Taxation Laws Amendment Act, 2015 implemented 1 March 2016), retirement proceeds from provident funds are not required to be annuitised, yet members are benefiting from the tax-deductibility of retirement contributions up to 27.5%," says Ndlovu.

 

"Harmonisation also paves the way for the further consolidation of funds. The differences in annuitisation previously prevented pension and provident funds from being consolidated. Their consolidation  will allow for cost savings, which ultimately benefits the members of these funds," says Ndlovu.

 

"In our view National Treasury will need to invest in a sound communication strategy to educate members on the benefits of going forward with T-day to prevent any further delays. Private and public enterprises will also need to work together to address the misconception that resulted in many members resigning from their jobs in 2016."

 

On the whole, Ndlovu believes that Budget 2020/21 was positive for South Africans. "Reflecting on the various actions taken by the Minister of Finance to address the widening deficit while keeping tax rates unchanged and moving forward with the annuitisation of provident funds, Old Mutual Corporate is confident that the tabled budget, if implemented without undue delays, will boost business confidence and policy certainty," concludes Ndlovu.

 
Source: Siphosethu, MAGNA CARTA
 
« Back to previous page Print this page » |
 

Breaking News »

The Pandemic, Physical Damage, Business Interruption Losses and Reinsurance

The Pandemic, Physical Damage, Business Interruption Losses and Reinsurance How is your 2000 piece jigsaw puzzle progressing?   Coronavirus and physical damage You may have seen reference ...
Read More »

  

Financial implications for retirement communities in a time of crisis

Johannesburg, 7 April 20: Protecting the elderly against COVID-19 infection is a pressing concern for everyone operating senior living communities. The greater susceptibility of seniors to the virus, as well as ...
Read More »

  

COVID-19: MAKE SURE YOUR MEDICAL AID, SAVINGS AND RISK BENEFITS ARE COVERED

By Rita Cool, certified financial planner at Alexander Forbes and NT Snyman, senior consultant at Alexander Forbes Health   The COVID-19 pandemic has placed additional financial pressure on South Africans ...
Read More »

  

Retirement in the time of COVID-19

The global pandemic has highlighted the increased risk of death the elderly face if they contract COVID-19.   Fortunately, the majority who contract the virus will survive. However, they will ...
Read More »

 

More News »

Image

Healthcare »

Image

Investment »

Image

Life »

Image

Short-term »

Advertise Here
Advertise Here

From The Glossary »

Icon

Efficiency:

Efficiency measures whether investors are sufficiently compensated for an investment's volatility. The ratio is calculated as the total portfolio return divided by the volatility of the return.
More Definitions »

 

Advertise

 

eZine

 

Contact IG

 

Media Pack

 

RSS Feeds

By using this website you agree to the Terms of Use.
Copyright © Insurance Gateway (Pty) Ltd 2004 - 2020. All Rights Reserved.