South Africans, generally, do not save
enough for retirement. A large proportion tends to cash in some or all of their
retirement savings when changing employers. This is evident in the low savings
rate of the country – as various studies estimate that less than 10% of people
can retire comfortably.
To increase the level of retirement
savings, Government believes tax incentives can play a valuable role and
they’ve been working on policies to change the landscape and reform
retirement-planning. There are a number of changes that were intended to
come into effect next year and the landscape around these changes is a complex
one. Increasing longevity means one’s savings need to last longer and government’s
proposals around retirement
reform aimed to encourage investors to act in their own best interests.
However, the proposals caused wide scale
panic. Thousands of people, who feared being forced to forego cash pay outs
funds when changing jobs, quit their jobs to access their money before the
new laws take effect. It emerged earlier this month that Finance Minister
Nhlanhla Nene agreed to a two-year delay after Cosatu successfully lobbied
A number of service providers sadly have
already spent a significant amount of time and money to be ready for the change
next year, by implementing changes to their administrative systems only to hear
they will now have to wait until 2017.
The delay will also mean that contributions
to provident funds will not benefit from the same tax deductions enjoyed by
pension fund contributions, until the law takes effect. Provident fund members
will not be required to convert two-thirds of their savings into retirement
annuities and will still be able to cash them out as a lump sum on retirement.
Payroll departments can’t ignore these
ongoing changes in the retirement industry and it’s now more than ever
necessary to stay up to date with legislation to avoid what could be an
administrative nightmare and unnecessary costs.
If you require Finance staff that can help
you manage the coming changes in your company, we can assist. Communicate Recruitment
represents a range of exclusive, skilled candidates across all levels of the
finance sector including senior executive financial positions. These include
banking, insurance, mining, financial services, FMCG and management. Contact us today!
Credit: FreeDigitalPhotos.net by Stuart