As far back as 2011, the South African government announced its intention to promote a culture of retirement savings through extensive retirement tax reform. The latest retirement reform legislation includes enhanced tax relief on contributions to retirement funds, an alignment of different types of retirement funds, as well as greater portability between retirement funds.
It is important to note that this legislation has no impact on how your funds are invested. What is affected is how much you can put into your retirement vehicles and how you ultimately receive your benefits.
In December 2015, it was confirmed that the retirement tax reform would come into effect on 1 March 2016. However, on 18 February 2016, the Minister of Finance, Pravin Ghordan held a press briefing and confirmed that certain aspects of the reform will be postponed for two years. We have included a link to the National Treasury’s press release below, for your information.
Cabinet will table an urgent legislative amendment before 1 March 2016 to postpone the implementation date from 1 March 2016 to 1 March 2018 so that further consultation can be held with key stakeholders.
The following will be postponed to 1 March 2018:
- Provident fund/provident preservation fund annuitisation. Provident fund members will not be required to annuitise benefits accruing up to 1 March 2018; and
- The tax-free transfer of benefits from pension/pension preservation funds to provident funds/provident preservation funds.
The following will go ahead as planned on 1 March 2016:
- The tax deduction for contributions to all retirement funds (including provident funds) will increase to 27.5 percent of the greater of taxable income or remuneration, up to a cap of R350 000 per year;
- The minimum threshold required for annuitisation for pension and retirement annuity funds will still be increased from R75 000 to R247 500; and
- All other provisions legislated in the 2015 Tax Laws Amendment Act (including the Risk Policy Fund changes).
>>National Treasury press release 18 February 2016