Treasury forges ahead with retirement reform
04 December 2015
Posted by: Author: Ingé Lamprecht
Author: Ingé Lamprecht (Moneyweb)
Tax harmonisation of retirement funds to be implemented March 1, 2016.
National Treasury has confirmed that regulations to harmonise the taxation of contributions to pension funds, retirement annuities and provident funds will take effect on March 1 next year.
This means that provident fund members will only be able to take one third of their pension benefit as a cash lump sum at retirement and that the remaining two thirds will have to be annuitised. However, this will only apply to contributions made after March 1, 2016 and for those below 55 years of age. Moreover, members will only be required to annuitise once their retirement savings exceed an increased amount of R247 500. The previously proposed threshold was R150 000.
Provident fund members could previously take their full pension benefit as a cash lump sum at retirement. Pension and retirement annuity funds are already required to annuitise and won’t be affected by this particular change.
The regulations were initially scheduled for implementation in March this year but were postponed amid concerns that members would not have access to their pension benefits prior to retirement once the new regulations were introduced. This fuelled pre-mature resignations to access retirement funds.
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This article first appeared on moneyweb.co.za.