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Taxand South Africa looks at the 2017 South African Budget Review, published on 22 February, and shares how it will affect several factors including pension funds.
Preservation of benefits after reaching normal retirement dates:
In 2014, amendments were made to the Income Tax Act, 1962 to allow individuals to elect to retire. The date on which the lump sum benefit accrued to the individual depended on the date on which the individual elected to retire and not on the normal retirement age. Currently, once the individual elects to retire, the Income Tax Act does not cater for the transfer of lump sum benefits from one retirement fund to another. The budget review proposes that transfers of retirement interests be allowed from a retirement fund to a retirement annuity fund, subject to fund rules.
Tax-exempt status of pre-March 1998 build-up in public sector funds:
Currently, the Income Tax Act provides for the tax-free transfer of pre-March 1998 lump-sum benefits from a public sector fund to a pension fund. The budget review proposes that subsequent transfers of these lump sum benefits to another pension fund be tax free.
Discover more: What the 2017 South African budget review means for pension funds
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The 2017 South African Budget Review contained several statements that may be of interest to pension funds, their investment managers and administrators.