OPINION: Imminent tax laws on retirement savings
Your prime years are the best time to start planning and saving for your retirement. The sooner you start to save the more time your money will have to grow.
In the prime years of your life, retirement may seem far away and you may think there are still many years ahead to prepare. But the years go by faster than you think.
You could live for 20 years or more in retirement and yet the Government Pension, your savings or your private pension fund may not provide you with enough income to pull through those years. This is why it’s important to save. According to the Sanlam Benchmark Survey 2013, only 30% of pensioners believe they have enough capital to last the rest of their lives.
The National Treasury released the Taxation Laws Amendment Bill (Bill 39 of 2013) in October last year. The Bill includes amendments to the Value-Added Tax Act of 1991, Income Tax Act of 1962 as well as other tax legislation. The President still has to approve the Bill before it becomes the Taxation Laws Amendment Act but it is unlikely that significant (if any) changes will be made to the Bill. The regime will only take effect from 1 March 2015 and will only apply to contributions made on or after this date.
Taxpayers should explore the available options for their retirement saving contributions and investments. Early planning can allow you to structure these contributions and investments optimally, taking this tax regime into account.
There are various modifications from the current regime. It appears that the revised retirement savings regime will provide taxpayers with greater deductions and more freedom to choose the retirement savings plan that is tailored to best suit individual needs. This might implicate that high income earning individuals may have to wisely consider the structuring of their remuneration packages and those who wish to accumulate wealth in other forms of investments such as collective investment schemes may also be affected by amendments included in the Bill.
Most people want a comfortable retirement but it requires careful planning, saving and action. Speak to your financial advisor about your retirement. The sooner you start the better.
To view the Taxation Laws Amendment Bill 39 of 2013, please go to:
https://www.treasury.gov.za/legislation/bills/2013/bills2013_bill39-2013.pdf
Chrisna Roberts is a partner at financial management and accounting firm Wallrich, based in Randburg.
