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The South African Institute of Professional Accountants (SAIPA) has expressed concerns that the Government has once again agreed to postpone the compulsory annuitisation of provident fund savings on retirement, which are to come into effect on 1 March 2016.
“In our view, there has been plenty of opportunity for engagement on this legislation, and further delay in compulsory annuitisation has a long-term impact,” says Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at SAIPA. “Retirement savings should be preserved for retirement years, and not used to fund short-term needs. The original intent of making contributions to a retirement fund is to save for retirement, full-stop.” The recent amendments introduced by the Taxation Laws Amendment Act (2015) aims to reform and streamline the retirement funding industry. Proposed reforms include standardising the tax treatment of contributions made by employers and employees to retirement annuity, provident and pension funds. Also, closing the gap abused by high-income individuals to gain tax benefits. The second major reform involves harmonising fund rules across all three types of fund and how the funds are taxed in order to make it easier for investors to switch between funds without suffering adverse consequences, and to ensure that everyone has access to the same benefits. The third major reform proposes to bring provident funds in line with pension and retirement annuity funds by stipulating that at least two-thirds of retirement savings be converted into an annuity on retirement to provide a constant income stream after retirement. This is the reform that Cosatu objects to. Let’s not forget that retirement annuity and pension fund savings already has the compulsory annuitisation requirement. Retief says that Government should be wary of allowing itself to be forced into allowing funds intended to fund retirement to be used to pay off short-term debts, thus leaving South Africans facing the bleak prospect of an underfunded retirement, or again placing the burden on Governments shoulders, funded by taxpayers. “The fact is that already the vast majority of South Africans do not have enough money to fund their retirement. Forcing them to preserve at least two-thirds of their provident fund savings is a sound policy decision because it protects the long-term interests of working people, and it also reduces the potential burden on the state, which has to assume the responsibility for helping those who face a destitute old age,” says Retief. “It does not make sense to sacrifice the future in order to solve immediate problems. Retirement funding is not a vehicle for general saving and should not be seen as such.” ENDS MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants
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 The proposal to Parliament by National Treasury to delay the implementation of the proposed retirement funding reform by two years is a negative development and should be reconsidered, says Ettiene Retief, chairperson of the National Tax and SARS Stakeholders Committees at the South African Institute of Professional Accountants (SAIPA).
“There has been extensive consultation with all stakeholders and agreement on the need for reform had been reached and a clear date set—in fact the process has been dragging on for years,” says Retief. “To propose a substantial delay like this at the eleventh hour is highly undesirable and will have several unwelcome consequences.” Due to come into effect on 1 March 2015, the proposed reforms are aimed at harmonising the regulations and tax rules relating to the main retirement-funding vehicles—provident funds, retirement annuities and pension funds. One of the goals of the reforms is to standardise the tax rules relating to these various funding vehicles. There is general agreement that this reform is necessary, and the insurance carriers and investment houses as well as financial advisors are far advanced in their planning for the shift, as are companies and individual investors. It’s unacceptable, says Retief, that uncertainty should be introduced at this late stage, and is likely to breed mistrust. The other main goal of the reform is to protect retirement savings, primarily by altering the rules affecting provident funds. At present, members of provident funds are not allowed to claim tax relief on extra or top-up contributions, as is the case with retirement and pension funds. It’s a discrepancy that discourages retirement saving. A further problem that the reforms aimed to solve was the fact that upon leaving a job, provident-fund members are allowed to cash in their entire savings, whereas retirement and pension funds have to be “preserved” by being transferred to a similar saving vehicle until a stipulated retirement age is reached. “There’s some indication that unions are unhappy with this preservation approach because their members use retirement savings to fund current shortfalls. We even see people resigning from companies to access their provident funds, and then rejoining the same company a few days later,” says Retief. “While one cannot minimise the economic pressure people are under, it’s irresponsible to let short-term considerations mortgage peoples’ futures—government must find a better way to address the problem. Allowing this damaging practice to continue for two further years will have severe consequences for the future of the most vulnerable workers.” SAIPA urges Parliament not to halt this much-needed reform. ENDS _______________________________________________________________________________________________________ MEDIA CONTACT: Cathlen Fourie, 012 644 2833, cathlen@thatpoint.co.za, www.atthatpoint.co.za For more information on SAIPA please visit: Website: www.saipa.co.za Twitter: @SAIPAcomms LinkedIn: South African institute of Professional Accountants Company Facebook: South African Institute of Professional Accountants |
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