Cape Town - The South African Institute of Professional Accountants (SAIPA) on Wednesday urged the government to go ahead with retirement funding reform, which is due to come into effect on March 1.
Noting that the budget speech is due to take place on February 24, Ettiene Retief, chairperson of the national tax and Sars stakeholders committees at SAIPA, said: “Uncertainty has a massive negative effect on business generally, and individual taxpayers themselves have been planning for the scheduled implementation of the new laws.”
While it was well known that certain parties were not in agreement with the laws, Retief said, “at this late stage, the right choice is to go ahead with the implementation”, which had already been delayed from 2015.
He said there were sound policy goals behind the reforms - which were aimed at harmonising the regulations relating to provident, pension and retirement annuity funds - and the government had consulted extensively.
The new law would allow members of provident funds to make a tax deduction on their contributions. Retief said higher tax deduction limits would encourage retirement saving, while a limit on the total allowance would make it harder for high-income earners to benefit excessively from tax deductions.
In effect, he said, the reform would level the playing field.
Retief also noted the extension of the requirement to purchase an annuity to members of provident funds, which means that, like members of pension and retirement funds, members of provident funds would now have to transfer a portion of their retirement pay-outs into an annuity.
He said: “Contributions made towards retirement savings should be preserved as such, and not easily accessible to fund short-term needs. This is a common problem as people use the funds available on termination of employment to fund short-term needs, and do not generally reinvest these funds into another retirement fund.”
He added that if reasons for amending the new regulations become apparent at a later date, this could be done via an amendment to the act, but “for now, it’s important to give everybody certainty”.
ANA