The government has confirmed its intention to force everyone to buy a pension for life with their retirement savings. This will form part of its current retirement and social security reform programme.
At a media conference on the Budget this week, SARS commissioner Pravin Gordhan said the final implementation date had been postponed from 2010 to 2012 because the reform programme had become a lot more comprehensive, with the inclusion of such things as a proposed national health scheme.
There will be incremental implementation of the reforms before the final date.
In the Budget Review document, the National Treasury, which heads the government's inter-departmental retirement and social security reform committee, says consideration is now being given to the unification of the pension and provident fund regimes.
Under the current structure, provident fund members, who do not receive tax incentives to save, may take their entire fund savings as a lump sum.
Pension fund members, who receive tax incentives to save, must use at least two-thirds of their retirement savings to purchase a pension at retirement.
In the Budget Review, the treasury confirms it is considering a number of other significant changes to retirement saving. These include:
- Restrictions on how much can be withdrawn from a fund before retirement and the minimum amount that must be used to purchase a pension.
- Placing a rand cap on tax incentives to save for retirement in a pension fund.
Currently the incentives are open-ended, based on a percentage of income. You can currently claim against taxable income contributions to a maximum of 7.5 percent of your pensionable income, when contributing to an occupational pension fund, and 15 percent of your taxable income (less your pensionable income) for a retirement annuity.
The cap will be either on an amount in rands of how much you earn from employment, above which no tax subsidy will be provided, or an annual monetary cap on all sources of income.