Case Notes: Moving towards compulsory annuitisation of provident fund benefits in South Africa

• Jurisdiction: South Africa
• Date: 20 August 2019
• Published date: 20 August 2019
• Author: Clement Marumoagae
• Pages: 390-402
• Citation: (2017) 29 SA Merc LJ 390

Case Notes

MOVING TOWARDS COMPULSORY

ANNUITISATION OF PROVIDENT FUND

BENEFITS IN SOUTH AFRICA

CLEMENT MARUMOAGAE*

Senior Lecturer, School of Law, University of the Witwatersrand

I INTRODUCTION

The South African government acting through the National Treasury,

has shown a desire to reform the country’s retirement industry. The

intended reform will be achieved through, among others, the harmoni-

sation of the tax treatment and compulsory annuitisation of retirement

benef‌its, including benef‌its from provident funds regulated by the

Taxation Laws Amendment Act 25 of 2015. This Act compels provident

fund members who meet a prescribed threshold to annuitise two-thirds

of their retirement benef‌its, rather than receiving the benef‌it as a

lump-sum cash payment. However, this legislative change has been

opposed by organised labour (Pamla ‘COSATU incensed at Zuma’s

signing of 2015 tax legislation into law’ Politicsweb 13 January 2016). In

response, government introduced the Revenue Laws Amendment Act 2

of 2016, which shifted the commencement date for compulsory annuiti-

sation of provident fund benef‌its forward by two years to start on 1

March 2018. This was to allow the Minister of Finance time to consult

with all relevant stakeholders, including Parliament, on the impact of

compulsory annuitisation of retirement fund benef‌its.

This note discusses the concept of compulsory annutisation of

retirement fund benef‌its in South Africa. It looks at the policy consider-

ations which moved government to implement compulsory annutisa-

tion of these benef‌its, and the criticism levelled at the initiative by

organised labour. The note is premised on the view that although

compulsory annuitisation is not necessarily a bad thing, it might

nonetheless not be tailored to individual circumstances of each and

every member of provident funds as there might be instances where a

*LLB LLM (Wits) LLM (NWU) Diploma in Insolvency Law and Practice (UP).

390

(2017) 29 SA Merc LJ 390

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