annuitisation of provident funds in south africa

Annuitisation – Social Protection and NEDLAC – Compulsory preservation. October 29, 2020 . High-performing institutions cultivate and grow talent, carefully balancing costs and rewards. This applies to both pension and provident funds. This has enacted the long-awaited legislation which provides for the same annuitisation rules that apply to members of pension funds, pension preservation funds and retirement annuity funds, to be applied to members of provident funds and provident preservation funds, after 1 March 2021 (T Day). The proposed amendments to Regulation 28 seek to make it easier for retirement funds to increase … Jacob-Zuma. Employers with such an arrangement may want to consider changing the plan so that benefit is funded independently of the fund — but because that would also change the tax treatment of plan premiums and benefits, any change needs to be assessed carefully. Retirement funds and their administrators are in for a busy time in the next few months. National Treasury has observed the vested right of provident fund members to be exempt from the new requirements. You ought to be grateful if you work for or join a company that offers a provident or pension scheme a part of its package. Erich Potgieter Pension funds and retirement annuity funds are bound by mandatory ‘annuitisation’ which requires a member to devote at least two-thirds of his or her benefit upon retirement to buying an annuity with one-third available to be taken as a lump sum. In most cases it will be some years before provident fund members feel any significant impact from this change, due to it applying only to prospective provident fund accumulations, other grandfathering provisions and the existing exception from annuitization requirements for de minimis retirement fund balances; however, administrators of provident and pension funds will need to maintain records of protected benefits applying to members with effect from March 1, 2021. However, the proposal has been controversial since enactment, and organised labour has been lobbying for it to be scrapped. The next few months are going to be very busy for retirement funds and their administrators. Press Release - Urgent request for public comment on the timing of uniform taxation and annuitisation for retirement funds in the Taxation Laws Amendment Bill, 2015 Local and reliable products and services. The de minimis exception for restricted benefits continues to apply. Our sophisticated approach to risk helps clients free up capital. View the detailed infographic | View the Afrikaans infographic. New South African provident fund rules came into effect on 1 March. In addition to the vested rights on existing benefits as at 28 February 2021, if existing provident fund members are 55 or older on 1 March 2021, and remain members of the same provident fund(s), they will also receive vested rights on their benefits from new contributions made to these funds from 1 March 2021 onwards. It now appears that it will go ahead, with effect from 1 March 2016. Study resource by How South Africa May 24, 2016, 10:55 am 1.3k Views. The premiums are paid out of contributions while beneﬁts received (if any) are part of the claimant’s early retirement beneﬁt; however, any such claims after March 1, 2021, for members under age 55 on that date would likely be subject to the annuitization requirement. 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These vested rights will continue to apply even if members transfer these vested benefits to other retirement funds before they retire, including if they transfer these benefits to pension, pension preservation or retirement annuity funds. t: 021 007 1550 l www.efbc.co.za l marius@efbc.co.za. “To complete the harmonisation process, benefits from contributions made to provident funds from 1 March 2021 onwards will be subject to the same rules at retirement as pension fund benefits, except where provident fund members are 55 or older on 1 March 2021 and remain members of the same provident fund(s),” Shaun Duddy of Allan Gray clarifies. The rules attempt to address the problem of retirees spending their retirement fund lump sums too quickly and the resulting risk of their outliving their retirement savings. We have the SARS tax rates tables built in - no need to look them up! For members of provident funds (and provident preservation funds) as of March 1, 2021: The treatment of pension fund benefits remains unchanged, although transfers of protected/restricted benefits between retirement funds must retain their respective protected/restricted status. In these definitions there are rules that have to be accommodated in the rules of a retirement fund. South Africa comes from a background of a poor savings culture. New tax rules in South Africa on the annuitization of provident funds and lump sum payouts made at retirement will take effect on March 1, 2021. South Africa: South African Provident Funds Annuitisation: Feel It – It Is Here (And No, It Is Not The World Cup)! What does the annuitisation of provident funds mean for you as a client? 'categories' : '', For existing members younger than 55 on 1 March 2021, the changes will therefore only impact benefits from new contributions made from 1 March 2021 onwards. In addition, the National Treasury will this week publish draft amendments to Regulation 28 for public comment. From 1 March 2021, retirement benefits from provident funds will be treated in the same way as pension funds … Retirement funds and their administrators are in for a busy time in the next few months. the annuitisation requirements for provident funds See notes on POSTPONEMENT OF from LAW MISC at University of South Africa Provident funds will have the same annuitisation rules as pension funds. Click here to download the Allan Gray insight article. What is not clear at this point is if there will be any changes to the tax deductions permitted specifically for provident funds while annuitisation has been put on hold. Annuitisation from March 2021. Click here! Qualifying criteria In practice, members tend to take full lump sums. By How retirement reform affects members. retirement fund lump sums Use our fund benefit calculator to work out the tax payable on lump sum payments from Pension funds, Provident funds and/or Retirement Annuity funds. Stellenbosch, South Africa, Provision of all level 1 FAIS Regulatory An annuity in the context of South African retirement funds can be a traditional life annuity guaranteed by an insurer or a “living annuity” (i.e., a series of drawdowns of the account balance with investment and demographic risk borne by the participant). “These proposals (referred to as the T-Day reforms) were originally intended to come into effect on 1 March 2015. According to Treasury existing default arrangements will be expected to be fully aligned to the by 1 March 2019. Tito Mboweni announces compulsory annuitisation of provident funds from March 2021 Posted by admin BL Premium reports that Finance Minister Tito Mboweni has announced that workers will be compelled to buy an annuity with two thirds of their provident funds …