RETIREMENT TAX CHANGES POSTPONED


Investing & Money
piece written on the 20th October 2014 by  

So it’s official, expected retirement tax reforms have been postponed to 2016 and possibly even 2017 if an agreement hasn’t been reached by July next year. With everyone expecting to enjoy a higher tax return from next year, it’s really quite sad to hear this news.

tax

For those of you who aren’t in the know, the Personal Finance section of the Weekend Argus published a great article on what was to be expected:

  • Allowing provident fund members a tax deduction for contributions for the first time and making the tax deductions for provident and pension funds the same.
  • Allowing deductions for retirement fund contributions to any type of fund of up to 27.5% of taxable income to remuneration, whichever is higher. This would have meant most pension fund members would have enjoyed a higher tax deduction, because current deductions (20% for an employer and 7.5% for an employee) are on pensionable income only. It would also have meant that members of retirement annuity funds received a substantial increase on the existing deductions of 15% of non retirement funding income.
  • Limiting the tax deductions to R350,000 a year, a move that was likely to affect only high earners with an income more than R1.27 million a year depending on their contribution rate.
  • Allowing tax-free transfers between provident and pension funds.
  • Compelling provident fund members to buy an annuity, or monthly pension, with two-thirds of any retirement contribution to, and the growth on these, in their funds after the tax amendments took effect. However, any amounts saved prior to the implementation date could still be taken as a lump sum, and there are also provisions exempting those over the age of 55 or with small amounts of savings (R150,000 and less) from being compelled to buy an annuity.

It’s a great shame on so many accounts, but for me the biggest hit is the fact that I’d delayed a number of investment moves in anticipation of March, 2014. Now that it isn’t happening, I’ve lost several months of possible growth. Incredibly annoying, but what can we do; ultimately it just means that we’ll have to sit back and wait in anticipation this time next year to hear if it’s going to be a reality in 2015.

Here are some articles from around the Internet on this subject: