What changes have been implemented from 1 March 2016

After a challenging few weeks as well as last minute changes, the 2015 Tax Laws Amendment Act (and the 2013 and 2014 Acts) provisions relating to retirement will come into effect on 1 March 2016, except for the annuitisation on Provident Funds and related provisions. The changes will be introduced retrospectively through an urgent tax amendment bill.

• The change to the tax deductibility of retirement fund contributions (Pension, Provident and Retirement Annuity Funds) have increased to 27.5% of the greater of taxable income or remuneration, up to a cap of R350 000 per year. It is important for members contributing above the cap to consult with a Tax Practitioner and/or Financial Advisor.

• The minimum threshold required for annuitisation for Pension and Retirement Annuity Funds was increased from R75 000 to R247 500.

• Provident Fund members are not required to buy an annuity with their retirement benefits at retirement. Government is proposing that the annuitisation requirement for Provident Fund members be postponed for two years to allow for further consultation with key stakeholders.

• Transfers from Pension Funds to Provident Funds will continue to be taxed.

• There are no changes to the rules at this point where an employee resigns from employment.

It’s important to note that the intention of Retirement Reform is to create a culture of saving and in so doing, encouraging members to prepare for a comfortable retirement.