Cape Town - The Congress of South African Trade Unions (Cosatu) said it is "deeply incensed and disappointed" to hear that President Jacob Zuma has now officially signed all tax legislation from 2015 into law.
This includes the 2015 Tax Laws Amendment Act and the Tax Administration Laws Amendment Act.
This means all retirement reforms related to tax harmonisation on retirement contributions and benefits will come into effect on March 1 2016.
In Cosatu's view, this will have "dire and lasting consequences" on the relationship between government and the workers.
"By signing this act, the president has poisoned the relations between the ANC-led government and the workers," Cosatu claimed.
The union regards the legislation as an offence against all working people, who have their deferred wages to look forward to after retirement.
Cosatu said workers would fight any attempts to impose the compulsory preservation of their deferred wages, regardless of the sincerity and noble motives underlying the new laws.
"No government has a right to unilaterally decide for workers how and when to spend their retirement savings," Cosatu said in a statement.
"The workers reject the notion perpetuated by this action that a tiny elite of government bureaucrats and mandarins are better placed to decide and dictate to workers, when and how to spend their deferred salaries."
Cosatu added that it refuses to be coerced into accepting what it regards as greater government activity and involvement in the affairs of individual workers.
"These savings are part of workers' hard-earned salaries and should be accessible to the workers, as and when they need them, especially in the absence of a comprehensive social security," said Cosatu.
"It is unacceptable that, when we ask to be given a comprehensive social security and retirement reform discussion paper, which government has failed to deliver for more than ten years, we get given the Taxation Laws Amendment Act. And when we take this process to Nedlac, where government is represented by the National Treasury, they abandon the engagements."
In Cosatu's view the new legislation is a sign of the state's "determination to continue to impose the ineffective and much discredited conservative neoliberal macroeconomic framework".
"This framework will continue to protract and defend the basic structure of the class system, where resources are skewed towards the ruling classes and state revenue is moved away from taxing the rich and powerful."
Cosatu said this issue will be a top priority to be discussed at the trade federation's upcoming central executive committee meeting next month.
Only about 5% of South Africans save enough to retire adequately, Brenthurst Wealth MD Brian Butchart told Finweek.
Pensioners therefore often run out of retirement savings prematurely and become dependent on relatives or government grants.
To prevent this, National Treasury proposed reforms aimed at encouraging saving towards retirement.
Up to now, retirement money has been paid out as cash by default, explained Hugh Hacking, head of Old Mutual Corporate Consultations.
Under the new laws, provident fund members who resign from their jobs will, however, still be able to take all their retirement savings as a cash lump sum upon resignation, with tax implications.
Alternatively they can preserve their money with a financial institution, or previous or new employer – without tax implications, to motivate people to save.
However, at retirement, provident fund members will also be required to convert at least two-thirds of their retirement savings into an annuity or pension, instead of receiving a large one-off sum of cash.
Michelle Acton, principal consultant, Old Mutual Corporate Consultants, said on Wednesday the retirement reforms had been extensively debated.
Acton believes the effects of these changes are generally positive for all retirement fund members, especially for provident fund members whose contributions will now be tax deductible. In most cases this will translate into increased take-home pay.
“While the reforms have the potential to deliver benefits for fund members, unlocking these benefits in full will require action by employers and their advisers, in consultation with employees and members. Members will need to be consulted on whether they want to merely benefit from any cost savings that may become available or whether they prefer to leverage the reforms to save more towards their retirement," said Acton.
“Doing this could be especially advantageous to those fund members who are behind on their retirement savings.”