CRS Technologies – making sense of pension tax reforms
The reformation of South Africa’s retirement regulation framework continues to make headlines. Most recently, the National Treasury and COSATU officials have agreed to the delay of the implementation of retirement tax reforms promulgated last year. Human Capital Management (HCM) experts suggest while employers are left frustrated, the move does represent a milestone for worker input over pension and provident fund management going forward.
In September 2014 the issue looked to become more complicated because of a rumour that plans were afoot to nationalise pension and provident funds, which led to an increase in resignations by people who feared a loss of their investments.
In a Parliamentary Statement on Retirement Reforms, the Minister of Finance Nhlanhla Nene stated that “Government respects the fact that these retirement funds belong to their members. Government has never had, and does not have, any intention to nationalise these funds. Rumours to this effect are a blatant lie.”
The Statement also debunked rumour which suggested Government has altered laws on preservation before retirement. “Employees still have the right to cash their pension and provident funds when they resign their jobs.”
A month later and National Treasury Deputy Director-General Ismail Momoniat has informed the Parliament standing committee on finance about the proposed delay until 2017 for the implementation date (T –Day) and further consultation could take place with trade unions. The delay might be for one year only if Mr Nene believes this is sufficient.
This in effect mean that the increase in the allowable Retirement contribution % for tax purposes to a more generous 27.5% of taxable income or remuneration whichever is greater, as well as the introduction of a limit on tax-deductible retirement fund contributions of R350,000 will be delayed. It will also then mean that the contributions to provident funds will not benefit from the same tax deductions enjoyed by pension fund contributions, until the law takes effect.
COSATU has called for a moratorium on the reforms pending the finalisation of a comprehensive social security policy.
“The broader human resources and human capital management community is under significant pressure because of the implications of the anticipated retirement reformation process. Businesses have expected the change and have tried to prepare themselves accordingly, but this delay in implementation will not appease anxious employers,” says James McKerrell, CEO of CRS Technologies.
McKerrell adds that CRS Technologies has the experience, resources and expertise to assist businesses to manage their resources in order to remain ready for the eventual implementation of the retirement reforms.
“We will continue to advise and inform our clients about developments that impact on retirement funds, policies and procedures. This is certainly a complex situation, but one that we are confident will be resolved through ongoing discussion between key stakeholders, including unions, businesses and employees,” McKerrell continues.