Gordhan Announces Proposals on Retirement Reform

In a bid to encourage South Africans to save more, the Minister of Finance Pravin Gordhan, has announced plans to introduce tax-preferred savings and investment accounts in 2015.

Presenting the 2013 National Budget in the National Assembly on Wednesday, Gordhan said this and other initiatives formed part of proposals to encourage households to save more. The legislation would be introduced later this year.

This follows the publication of a discussion document in September last year and after consideration of the comments received; the government intends to proceed with the implementation of tax-preferred savings and investment accounts.

Under the proposal, all returns accrued in these accounts, as well as any withdrawals, would be exempt from tax. The account would have an initial annual contribution limit of R30 000 and a lifetime limit of R500 000, to be increased regularly in line with inflation.

The new accounts will be introduced by April 2015. In the meantime, with effect from March 1, tax-free interest-income annual thresholds will be increased from R33 000 to R34 500 for individuals 65 years and over, and from R22 800 to R23 800 for individuals below 65 years old.

Other initiatives the minister announced include making it compulsory for retirement funds to identify appropriate preservation funds for exiting members, who will be encouraged to preserve when changing jobs.

Retirement funds will also be required to guide their members through the process of converting savings into...