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Tax changes regarding retirement funds

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(Shutterstock)
A Fin24 user wants to know if the tax implications relating to a retirment annuity is the same as those relating to a provident fund policy. He writes:

I believe that all interest and capital gains within a retirement annuity policy is tax free until the policy matures.

Is it exactly the same within a provident fund policy?

Michelle Dubois, legal marketing specialist at Liberty responds:

One of the many advantages of investing in a retirement fund is the tax savings within the fund, which applies to pension funds, provident funds and retirement annuities.

This means that, while in the fund, the proceeds are exempt from income tax, capital gains tax and dividend withholding tax.

This results in an enhanced possible return for investors.

As from March 1 2015 the tax treatment of pension, provident and retirement annuity funds will be changed so that three retirement savings vehicles are treated in the same manner.

From this date the total contribution deductible by an employee will be limited to 27.5% of the greater of remuneration or taxable income, capped at an annual limit of R350 000.

This will further ensure that the tax treatment of the various retirement funds is aligned.

- Fin24

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Disclaimer:

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Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
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