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Cape Town - Finance Minister Pravin Gordhan highlighted financial security as one of the key features of the 2014 Budget.
His specific remarks regarding the retirement and savings industry reforms reinforced the objectives that National Treasury, the financial regulator and the legislature have been working on over the past three years.
Since the publication of National Treasury’s strategic document “A safer financial sector to serve South Africa better” in 2011, we have seen a great number of regulatory reforms being rolled out pursuant to the current administration’s, which aim to protect and improve financial wellbeing for South Africans.
More particularly, in 2012 we saw the publication of a discussion paper titled “Enabling a better income in retirement” (Paper B in a series of technical discussion papers on retirement reform).
To this end and in his 2014 Budget speech, Minister Gordhan emphasised that measures will be taken to secure income in retirement for all South Africans and to ensure that unnecessary costs in the retirement system are eradicated.
The latter has been a focus of increased industry discussion post the publication of a technical discussion paper on “Charges in South African retirement funds” (Paper A) in July last year.
Draft regulatory reforms are expected to be published imminently pursuant to the agreement which has been reached with the Association of Savings and Investment of South Africa on a way forward to reduce the level of charges in the retirement sector.
Minister Gordhan furthermore emphasised that the administration will seek to improve coverage and preservation of retirement funds (also discussed in a technical discussion paper released in 2012 titled “Preservation, portability and governance for retirement funds”).
The 2014 Budget Review states that a document describing the changes in this context of coverage and preservation, and setting out proposed reforms, will soon be released.
No specific details were provided on the long awaited and much discussed mandatory national retirement system, aimed to catch the 6 million South Africans who do not have access to an employer-sponsored retirement plan, save that the administration is “intend[ing] to move progressively towards a mandatory system of retirement for all employed workers.”
In terms of the budget’s main tax proposals, in the retirement arena, an increase in the tax free lump-sum amount paid out of retirement funds was proposed.
The increase from R315k to R500k was stated to benefit particularly lower income members.
The anticipated detailed retirement-related tax proposals are stated in the Budget Review to form part of the broader package of retirement reforms which are aimed at making the system simpler and fairer.
In addition, on-going plans (as also referred to in the technical discussion paper on “Incentivising non-retirement savings” (Paper D) published by National Treasury in October 2012) to encourage household savings is expected to proceed this year through legislative intervention.
As a complimentary feature of the proposed tax reform, National Treasury will introduce a new “top-up retail savings bond” which will allow for periodic deposits into a government retail bond.
It is envisaged that this bond will also be available to stokvels and other community savings groups.
Finally, Gordhan emphasised South Africa as an important centre for fund and asset management services in Africa.
In terms of the fiscal framework and long-term sustainability goals he referred to our debt markets remaining highly liquid and competitive and that the first sukuk (Islamic) bond will be issued during 2014.
Government will also be looking into the possibilities for introducing a sukuk retail savings bond.
* Arabella Bennett is a director in the banking & finance business area of ENSafrica, and specialises in pensions law. Views expressed are her own.
His specific remarks regarding the retirement and savings industry reforms reinforced the objectives that National Treasury, the financial regulator and the legislature have been working on over the past three years.
Since the publication of National Treasury’s strategic document “A safer financial sector to serve South Africa better” in 2011, we have seen a great number of regulatory reforms being rolled out pursuant to the current administration’s, which aim to protect and improve financial wellbeing for South Africans.
More particularly, in 2012 we saw the publication of a discussion paper titled “Enabling a better income in retirement” (Paper B in a series of technical discussion papers on retirement reform).
To this end and in his 2014 Budget speech, Minister Gordhan emphasised that measures will be taken to secure income in retirement for all South Africans and to ensure that unnecessary costs in the retirement system are eradicated.
The latter has been a focus of increased industry discussion post the publication of a technical discussion paper on “Charges in South African retirement funds” (Paper A) in July last year.
Draft regulatory reforms are expected to be published imminently pursuant to the agreement which has been reached with the Association of Savings and Investment of South Africa on a way forward to reduce the level of charges in the retirement sector.
Minister Gordhan furthermore emphasised that the administration will seek to improve coverage and preservation of retirement funds (also discussed in a technical discussion paper released in 2012 titled “Preservation, portability and governance for retirement funds”).
The 2014 Budget Review states that a document describing the changes in this context of coverage and preservation, and setting out proposed reforms, will soon be released.
No specific details were provided on the long awaited and much discussed mandatory national retirement system, aimed to catch the 6 million South Africans who do not have access to an employer-sponsored retirement plan, save that the administration is “intend[ing] to move progressively towards a mandatory system of retirement for all employed workers.”
In terms of the budget’s main tax proposals, in the retirement arena, an increase in the tax free lump-sum amount paid out of retirement funds was proposed.
The increase from R315k to R500k was stated to benefit particularly lower income members.
The anticipated detailed retirement-related tax proposals are stated in the Budget Review to form part of the broader package of retirement reforms which are aimed at making the system simpler and fairer.
In addition, on-going plans (as also referred to in the technical discussion paper on “Incentivising non-retirement savings” (Paper D) published by National Treasury in October 2012) to encourage household savings is expected to proceed this year through legislative intervention.
As a complimentary feature of the proposed tax reform, National Treasury will introduce a new “top-up retail savings bond” which will allow for periodic deposits into a government retail bond.
It is envisaged that this bond will also be available to stokvels and other community savings groups.
Finally, Gordhan emphasised South Africa as an important centre for fund and asset management services in Africa.
In terms of the fiscal framework and long-term sustainability goals he referred to our debt markets remaining highly liquid and competitive and that the first sukuk (Islamic) bond will be issued during 2014.
Government will also be looking into the possibilities for introducing a sukuk retail savings bond.
* Arabella Bennett is a director in the banking & finance business area of ENSafrica, and specialises in pensions law. Views expressed are her own.
