Parliament’s Standing Committee on Finance has approved a bill that will delay for two years the requirement for members of provident funds to buy a pension at retirement (annuitise their benefits).
The committee included in the bill an obligation on Finance Minister Pravin Gordhan to discuss the implementation of annuitisation with interested parties.
The bill says the deliberations must include parties represented at the National Economic Development and Labour Council (Nedlac), and the minister must table a report on these deliberations in the National Assembly, not later than August 31, 2017.
The conditions were included in the bill after Cosatu threatened to call a general strike if annuitisation was merely deferred. The National Union of Mineworkers of South Africa remains opposed the deferment of annuitisation.
The bill is expected to go before the National Assembly before the current parliamentary session closes on Friday.
In addition, the committee issued a report in which it made recommendations to National Treasury and the minister.
The first recommendation is that the discussion paper on social security reform, which the unions are demanding as a condition for considering any retirement reforms, should be tabled at Nedlac within three months of the promulgation of the bill.
Gordhan said in his Budget Speech last month that the paper will be released by the end of June.
The committee also recommended that Nedlac deliberate on an appropriate package of social security measures, as well as retirement fund reforms, and that National Treasury engage with interested parties outside Nedlac.
It asked Treasury to report to the committee on the progress of the negotiations every quarter, and the minister to report to Parliament every six months.
The committee also recommended that, if annuitisation is scrapped altogether, the tax deductions for contributions by provident fund members should cease.
New tax deductions for all retirement fund members who contribute to a retirement fund became effective from March 1, and will not be delayed for two years. This means provident fund members should see an increase in their take-home pay from this month, and many other retirement fund members will benefit from the ability to claim higher tax deductions for contributions.
Only wealthy taxpayers be worse off as a result of the new R350 000 annual limit on tax deductions for contributions to a retirement fund.