The National Treasury is holding a three-day symposium next week at which a new dispensation for the taxation of retirement funds is to be discussed behind close doors by many players in the retirement industry.
Finance Minister Trevor Manuel has said he will introduce a new system for the taxation of retirement funds in the Budget next year.
Issues that still have to be resolved and which are likely to be on the agenda at the symposium - to be held on Wednesday, Thursday and Friday - include:
- Whether retirement funds should continue to be given tax advantages over other types of saving;
- Different tax approaches to different retirement funds (for example, provident and defined benefit funds are taxed on a different basis);
- Whether capital gains tax should be applied to retirement savings. Currently, they are exempt in terms of a three-year moratorium; and
- Whether foreign nationals receiving pensions from abroad should be made subject to income tax.
Michael Katz, who headed a commission that recommended wide-ranging changes to the taxation of retirement savings in 1997, told the Institute of Retirement Funds this week that it would be dangerous for the government to move in one fell swoop "from the bad of today to the good of tomorrow".
He says the government will have to adopt a considered approach to the introduction of any changes, with taxpayers being entitled to vesting rights, namely that any tax advantages they hold on current retirement savings will not be lost.
Katz says what is changed in one area could have a significant impact in another area - for example, individuals' total savings could be reduced.