The Marketing Site published this article about the National Treasury that announced changes to tax treatments of retirement fund contributions in provident, pension and retirement annuity funds, which will come into effect from March 2016. These are not the only amendments and most of the reforms are aimed to encourage consumers to save money for their retirement.
Wikus Olivier from DebtSafe, says people are not saving towards retirement, and when they can work no more, they are dependant on assistance from family members or government grants.
“South African consumers are cashing in their retirement savings early to pay off or settle their debts and this poses a great danger to their future financial security,” Olivier adds. He continues that the amendments will help people not choosing to receive their cash, because they will have to pay tax on that amount. Olivier advises employees changing jobs to carry on with the retirement fund when they switch jobs or invest the money in an annuity fund because no tax is applicable. DebtSafe launched a survey about saving and spending habits of consumers last year, and 50% of the participants indicated that they don’t have a budget or savings plan in place. “If someone changes jobs and chooses to cash in their retirement fund, they stand a chance to be dependent on credit when they retire,” says Olivier.
He adds that many credit providers give credit to pensioners too easily and this is unethical. He says many employees are over-indebted and change jobs just to access their pension funds. “Don’t run the risk of being unemployed just to get your savings, because you might not be able to find a job again… with unemployment rates at 25%, thousands of people apply for the same job as you, and you run the risk of not finding a job soon,” he warns.
Read the rest of the article to see what the consequences in Tax deductions will be.