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Approval for amendment bill on provident fund savings

10 March 2016   (0 Comments)
Posted by: Author: Linda Ensor
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Author: Linda Ensor (BDlive)

Parliament's standing committee on finance on Wednesday informally approved an amended bill that paves the way for the postponement of compulsory annuitisation of two-thirds of provident fund savings upon retirement.

The bill is due for debate in the National Assembly next week.

Last month the government caved in to trade union pressure by agreeing to a two-year delay in the annuitisation process. This came despite that President Jacob Zuma had signed the annuitisation clause of the Taxation Laws Amendment Act into law.

The committee’s formal adoption of the Revenue Laws Amendment Bill, which aims to postpone the implementation of the annuitisation regime until March 2018, is scheduled for Thursday or Friday.

The Democratic Alliance is set to oppose the postponement as it believes preservation of savings by means of annuitisation is necessary and important.

However, labour and industry representatives welcomed the compromise agreement.

These amendments formalise the consultation which will have to be undertaken over the next two years. They will require Finance Minister Pravin Gordhan to ensure that engagements with parties both inside and outside of the National Economic Development and Labour Council takes place.

He will have to report to Parliament by mid-2017 on the conclusions of the negotiations so that any agreement can be embodied in tax bills which are normally tabled in Parliament in about August.

The committee’s report to the National Assembly will include the conditions that have to be adhered to by all parties in the negotiations. They will include government’s finalisation of the social reform paper; agreement that there should be some form of preservation of savings; consultation by the Treasury with stakeholders on retirement reform including the preservation and annuitisation options; and that the Congress of South African Trade Unions (Cosatu) commit to talks and accept some form of preservation is necessary.

The need for some kind of guarantee is pertinent, given that this is the second successive year Cosatu’s intransigence has led to postponement in the implementation of the annuitisation clause.

Cosatu parliamentary officer Matthew Parks said the new clause requiring consultation gave the federation some legal assurance engagements would take place.

Association of Savings and Investment SA senior policy adviser Rosemary Lightbody said the amended bill looked "very promising". She said the fixed timelines for the negotiations would provide the industry with some certainty.

DA MP Alf Lees said that the postponement would keep the industry in a state of uncertainty for another two years.

The standing committee once again went to extraordinary lengths to ensure proper consultation with Cosatu and the National Union of Metalworkers of SA, which wanted the annuitisation clause expunged in its entirety and not repealed.

Treasury deputy director-general Ismail Momoniat said the social reform paper should be released by the end of June.

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