Reform pension, health issues, urges body

2013-02-25 18:30
Finance Minister Pravin Gordhan. (Picture: AFP) ~ AFP

Cape Town - The budget speech must highlight clear changes for healthcare and retirement initiatives, urges the Financial Intermediaries Association of Southern Africa (FIA).

The FIA wants Finance Minister Pravin Gordhan to place healthcare and retirement reform initiatives high on his agenda when he outlines government's financial blueprint in his annual budget speech on Wednesday February 27.

The government should consider increasing the level of healthcare tax credits for South African taxpayers, suggested Gregory Setzkorn, chairperson of FIA's healthcare committee.

“Such a move would help to increase the number of people purchasing private healthcare, thereby relieving the burden on the under-resourced state healthcare system.”

Regarding universal healthcare coverage through a National Health Insurance (NHI) scheme, Setzkorn said "it would also be advisable to offer tax concessions for private hospital groups and private medical service providers that enter into partnerships with the state facilities”.

“This would significantly boost the standard of healthcare to the uninsured and serve as a first step in encouraging a collaborative approach between the public and private healthcare systems," he said.

The body says that tax breaks for healthcare products, such as gap cover, dread disease cover and critical illness would encourage the uptake of these products, provided that they compete on a level playing field with medical schemes.

Gavin Came, chairperson of the financial planning committee of the FIA, proposed a change in the tax regime for endowments.

“It is discouraging to see a popular financial savings solution that attracted R3.4bn worth of new investments last year being taxed at 30%, with no rebates, in addition to a capital gains tax rate of 10%.”

“The merging of pension and provident funds would have myriad benefits as it would simplify the retirement planning world,” said Came.

The body believes that an increase in the percentage that savers can put into their retirement annuities or pension funds would encourage a greater level of saving.

“It is clear that we need to do much more to foster a savings culture in South Africa,” Came said.

However, he also cautioned that "excessive enforcement in the savings environment could destroy jobs and make the country less competitive globally”.

Pieter Cronjé, chairperson of FIA's employee benefits committee, said the budget will most likely announce changes to the tax deductibility of retirement contributions.

“Contribution limits were set out in National Treasury’s discussion paper on ‘Improving tax incentives for retirement savings’.

"The paper failed to address important issues such as how defined benefit funds will be treated and what constitutes ‘employment income’ and ‘taxable income’.”

Cronjé added that it is vital that the public is clear on how the changes impact on them as they will have a direct impact on savings going forward.

FIA, who represents more than 15 000 licensed financial services advisers throughout Southern Africa, says that its suggestions will lead to greater savings and a wider take-up of financial services products by consumers.

 - Fin24

* Visit our 2013 Budget section for full coverage of Finance Minister Pravin Gordhan's National Budget speech.

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