Retirement Reform 2015
Sharon Nieuwoudt
Tax deduction allowed in respect of
member contribution
Pension fund
Maximum
deductible is the
greater of:
R1 750 p.a.
Or
7,5% of
Retirementfunding
employment
Provident fund
Member
Contribution
not
Deductible
Retirement
Annuity Fund
Maximum
deductible
is the greater of:
15% of taxable
income from
non-retirement
funding income
(subject
to certain
exclusions) or
R3 500 less
deductible
pension fund
contribution or
R1 750
Tax deduction allowed in respect of
employer contribution
Pension fund
SARS generally allows
20% of an employee‟s
“approved remuneration”
The 20% is the total
for employer contributions
to pension, provident and
benefit funds
(e.g. medical scheme)
in respect of an Employee
Provident fund
Same as for
Pension Fund
Retirement
Annuity Fund
If the employers pay
premium on behalf of
its employee = taxable
benefit but also with a
deduction for the
employee within the
limits.
The payment
on behalf of the
employee is a
deductible expense
for the employer
What will change on 1 March 2015 (T-Day)
Employer contributions to all pension / provident / retirement annuity
funds will form part of an employee‟s taxable income.
The maximum deduction will be 27.5 per cent of the greater of
remuneration or taxable income.
A maximum tax deduction of R350 000 in one tax year will be
permitted and any unused deductions can be rolled over to another
year.
Employer contributions to all approved retirement funds will be
deductible against income
The new regime is aimed at having a uniform regime for all
contributions and so to encourage individuals to save towards
achieving an adequate level of retirement income.
What will change on March 2015 (T-Day)
E
X
A
M
P
L
E
S
Comparison of Retirement Funds (Current)~Withdrawal at Retirement
Pension fund
Maximum 1/3
lump sum – the
balance used for
mandatory
annuitisation.
Provident fund
Employee has a
choice to take full
benefit or any
portion of full benefit
as a lump sum
payment (1/3 rule
does not apply).
Retirement
Annuity Fund
Maximum 1/3
lump
sum – the
balance used for
mandatory
annuitisation.
Comparison of Retirement Funds (Current)~Withdrawal(Pre-retirement)
Pension fund
Full amount in
cash; or part in cash
and rest as transfer
to another
approved retirement
fund
Provident fund
Same as for
Pension Fund
Retirement
Annuity Fund
N/A
What will change on 1 March 2015 (P-Day)
As from 1 March 2015, provident fund members will be required to
annuitise two-thirds of their retirement interest upon retirement , but
the vested rights of existing members will be protected by not
requiring annuitisation (irrespective of whether member remains in the
fund) –
in respect of any accumulated savings as at 1 March 2015 and any
growth thereon; plus
for provident fund members above 55 years on 1 March 2015, any
contributions made after 1 March 2015 to that provident fund and any
growth thereon.
De minimus requirement to be raised to R150 000 (currently R75 000)
for a lump sum.
Income Protection Policies
Two types of personal „disability‟ insurance cover currently offered to
individuals:
Income protection (covers actual loss of future income)
contributions are tax deductible and pay-outs are taxed.
Capital protection (covers the loss of income-earning capacity,
e.g. loss of limb) contributions are not tax deductible and tax-free on
pay-outs.
As from 1 March 2015, there be no tax deduction for premiums /
contributions, and pay-outs will be free from tax on all personal
insurance cover, even if the plans are pre-existing(affecting both
personal and employer-provided provided policies).
The result will be greater equity and certainty as all personal
insurance cover will be treated the same for income tax purposes.
Way forward?
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