Updated: Jun 27, 2020
2018 kicked off with promises of a great year. Long awaited changes are being approved and tabled for legislation regarding the Employee Benefit space. This should result in an interesting and exciting year.
During December 2017 the following Legislative changes were tabled:
1. Annuitisation of provident funds
The compulsory annuitisation of provident funds at retirement has been postponed again to 1 March 2019. The result of the implementation would have been that both the contributions and the payment of benefits on all contributory funds would become uniform, with the pre-T-day retirement benefits of provident funds being protected against annuitisation. The implementation of this second part of the T-day changes was postponed to 1 March 2018 to allow for further consultations between Government and the National Economic Development and Labour Council (NEDLAC) on social security reform.
The Minister of Finance was expected to report back to Parliament on the outcome of those consultations by 31 August 2017. However, the debates on a comprehensive paper on social security have not been finalised yet. The Amendment Act provides that the Minister of Finance must table a report in the National Assembly not later than 31 August 2018. The implementation of the annuitisation of provident funds has also been postponed for another year. Effective date: 1 March 2019.
2. Postponement of retirement
In 2014 amendments were made to the definition of retirement date (section 1 of the Income Tax Act), and as from 1 March 2015, a member can choose his/her retirement date; subject to the specific fund rules. Amendments, at the same time, allowed any retirement lump-sum-benefit to accrue to a member on the date elected. These changes, however, only allowed retirees to delay retirement in the existing membership retirement fund.
As from 1 March 2018, retirees will be allowed to transfer their retirement benefit to a retirement annuity fund or, in other words, be allowed to transfer from the occupational fund and postpone retirement in a retirement annuity fund. It is hoped that these amendments will address the need for further contributions to a retirement fund after attaining the retirement age, and also the need for severing ties with an occupational retirement fund.
If a member of a provident fund transfers his/her retirement benefit to a retirement annuity fund, the rules of the retirement annuity fund will apply when he/she eventually takes his retirement benefit from the retirement annuity fund. Therefore he/she will not be able to take the whole retirement benefit in a lump-sum anymore but will be limited to taking only one-third in a lump-sum and buying a pension with the rest of his retirement benefit.
The amendments do not allow a member to stagger his/her retirement. A member who has reached his normal retirement date will have to take his full retirement benefit, whether he remains in the fund as an inactive member or transfers his benefit to a retirement annuity fund. He cannot take a part of the amount and leave the rest for a later date.
Effective date: 1 March 2018
by Kobus Herholdt - Optimum Employee Benefits email@example.com