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Gordhan sets record straight on retirement reforms

2016-02-18 14:06

Finance Minister Pravin Gordhan has explained the need to postpone the implementation of the annuitisation part of the tax law.


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Last Updated at 04:04
18 Feb 15:09
The minister has concluded the briefing.

18 Feb 15:08
Gordhan: We understand there are special things that need to be done and they can be done within the context of what we are trying to do here.

18 Feb 15:07
Gordhan: We appeal to all parties to work together.

18 Feb 15:07
Gordhan: The element postponed for two years is only the annuitisation aspect.

18 Feb 15:06
Gordhan: In terms of provident funds there are benefits that will accrue to workers from March 1 2016.

18 Feb 15:06
Gordhan: The act contains any number of tax provisions from the 2015 Budget.

18 Feb 15:06
Gordhan: I hope this has helped to understand where we are going.

18 Feb 15:06
Treasury: "Members of all pension funds, including public servants who are members of the Government Employees Pension Fund (GEPF), are not adversely affected by the new laws and should not risk their jobs by resigning. The hard-earned savings of all members of a retirement fund are perfectly safe, and accessible to them now and after 1 March 2016."

18 Feb 15:05
Treasury: "There is broad consensus that the harmonisation and capping of tax deductions will make the tax system simpler, more equitable and progressive. It will limit the tax deduction to very high- income earners and allow lower- and middle-income earners a bigger tax deduction."

18 Feb 15:05

The following amendments will continue as scheduled from 1 March 2016:

1. The tax deduction for contributions to all retirement funds (including provident funds) will increase to 27.5 per cent of the greater of taxable or remuneration, up to a cap of R350 000 per year, from 1 March 2016.

2. The minimum threshold required for annuitisation for pension and retirement annuity funds will still be increased from R75 000 to R247 500.

3. Aside from the issues covered in the urgent tax amendment bill, all other provisions legislated in the 2015 Tax Laws Amendment Act (and all other tax laws) will come into force on 1 March 2016.

18 Feb 15:04
Gordhan: We are making an extra effort to inform the public.

18 Feb 15:04
Gordhan: The problem is probably the complexity of what we are dealing with and the manner in which it is reported.

18 Feb 15:04
Gordhan: There might be individuals gossiping behind the back, but I cannot say anything about that. On a formal level they are clear about what we want.

18 Feb 15:03
Gordhan: We are in direct contact with leadership of Asisa. They understand the necessity of what we are doing.

18 Feb 15:03
Gordhan: We are very aware that we need to keep businesses in the loop.

18 Feb 15:03
Gordhan: Treasury - sometimes to my irritation - takes a long time to get industry comments and input. Something very few countries actually do.

18 Feb 15:03
Gordhan: We have policy certainty in most of our retirement industry.

18 Feb 15:00
Gordhan: We were assured that all the major players in the industry are happy with our move.

18 Feb 15:00
Gordhan: We are simply saying, to clear up confusion, let's sit down again and discuss.

18 Feb 15:00
Gordhan: Only issue here is whether during period of developing the process, we had enough input and we believe we did have enough consultation.

18 Feb 14:59
Gordhan: This process started when I was minister of finance in 2013.

18 Feb 14:58

Tax act delay will hit consumers long-term - expert

The problem with the latest delay in implementing the Tax Amendment Act is that it gives in to peoples' short-term use of provident fund savings to the detriment of long-term retirement needs, Ettiene Retief of the South African Institute of Professional Accountants (Saipa) cautioned on Thursday. 

18 Feb 14:57
Gordhan: If we scrap everything then we scrap annuitisation as well.

18 Feb 14:57
Gordhan: We want to use the two-year period to clarify confusion and address concerns and try to come up with a better design on eg. annuitisation.

18 Feb 14:57
Gordhan: In the longer term savings is a very important part of the sound financial future of families and of the country.

18 Feb 14:56
Gordhan: We ask labour to work with us on the design.

18 Feb 14:56
Gordhan: Why should we throw in the towel on something that could be beneficial to people in the long- term.

18 Feb 14:56
Gordhan: We have given a commitment to trade unions that the social security paper will be released when ready - I have been busy with the budget in the mean time.

18 Feb 14:55
Cosatu said on Thursday that they are not happy just with a mere postponement.

18 Feb 14:54
Gordhan: Industry is not opposed to the move.

18 Feb 14:54
Gordhan opens the floor for questions.

18 Feb 14:53
Gordhan: Understand our intent and what the amendment bill actually addresses.

18 Feb 14:53
Gordhan: The importance of this for reporting on the matter is that this is not changing one line that changes everything.

18 Feb 14:53
Gordhan: The privilege of a tax deduction was now also extended to provident fund members and that kicks in on March 1 2016.

18 Feb 14:53
Gordhan: Only the requirement of compulsory annuitisation after a certain amount has been accumulated will be postponed now.

18 Feb 14:52

Treasury said the following changes will be introduced through an urgent tax amendment bill, to be tabled next week:  

1. The bill will propose to Parliament to postpone the annuitisation requirement for provident funds for two years, until 1 March 2018.

2. Provident fund members will not be required to annuitise contributions to their funds that were made before 1 March 2018.

3. To ensure the integrity of the retirement system, the ability to transfer tax-free from pension fund to provident fund will also be delayed until 1 March 2018. Clarity on possible misinterpretations will also be provided in the bill, to ensure that payroll administrators apply the law in line with original intentions.

18 Feb 14:51
Gordhan: Remember this relates to new money accumulated in provident funds.

18 Feb 14:50
Gordhan: This confusion and need for further clarity in the minds of people who will be affected, led us to believe it is good to postpone one element only of the framework proposed.

18 Feb 14:49
Gordhan: This has nothing to do with pension funds or Government Employees Pension Fund.

18 Feb 14:49
Gordhan: As a result of signing of the act and following debate there is a lot of confusion - to the point where in fact pension fund members are not impacted by any of this but the confusion has created impact in people's minds.

18 Feb 14:49
Gordhan: Why are we undertaking this effort at this moment?

18 Feb 14:48
Gordhan: When does the provision of annuitisation begin - it was at R75 000 - after presentations by unions it was increased.

18 Feb 14:48
Gordhan: Tax Laws Amendment Acts have many proposals.

18 Feb 14:48
Gordhan: So it is not correct to say tax laws are postponed.

18 Feb 14:48
Gordhan: 2015 Tax Laws Amendment Act cover hedge funds, hybrid funds etc

18 Feb 14:47
Minister of Finance Pravin Gordhan: This is an important matter.

18 Feb 14:46
Gordhan has begun the media briefing, saying that media is not reporting on the matter correctly.

18 Feb 14:39

Cabinet is to table an urgent legislative amendment to postpone the implementation date of the Taxation Laws Amendment Act, reports Government's SA Government News Agency:

Briefing reporters on Thursday, following Cabinet’s fortnightly meeting, Minister in the Presidency for Performance, Monitoring and Evaluation Jeff Radebe said the amended act was supposed to come into effect on 1 March 2016.  

“Cabinet has decided to table a legislative amendment to the Taxation Laws Amendment Act as a matter of urgency to postpone the commencement date from 1 March 2016 to 1 March 2018 to allow for further consultations with all key stakeholders,” said Minister Radebe.

18 Feb 14:37
This infographic explained how the retirement reforms would impact South Africans.

18 Feb 14:34

What we know so far:

1. The Zuma government has again been forced to backpedal on a tax law amendment compelling two-thirds of provident fund savings to be put in a retirement annuity. READ

2. When President Jacob Zuma signed the Taxation Laws Amendment Act late last year he was unaware of Cosatu’s objections to provident fund proposals, says Jeff Radebe. READ

3. Finance Minister Pravin Gordhan has conceded that the last-minute proposal to amend the tax changes will be very costly for businesses and will need to be finalised quickly. READ

4. The government has denied that the decision to table a legislative amendment to the Taxation Laws Amendment Act was a move to appease the ANC's alliance partner, Cosatu. READ

5. A tax industry player has likened government's backtracking on the Tax Laws Amendment Act to starting a rocket and then getting someone out just before the launch.  READ

6.  At a time when South Africa needs policy certainty, the ANC has put its interests ahead of the country by postponing the tax law changes, says the DA. READ

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