t-day-provident-fund-members-take-note T-Day – Provident fund members take note

With just 10% of South Africans saving enough for retirement, the industry needs to find ways to adapt and evolve following the changes in legislation.

This reminder from Mfana Mnisi, Investment Fund Specialist at Sanlam Savings, comes in the wake of the promulgation of the latest Taxation Laws Amendment Bill. Known as T-Day, the legislation governs the retirement fund industry and aims to help South Africans save enough for their retirement by ensuring that their savings are protected.

“Prior to 1 March 2021, South Africans saving in a provident fund were able to take their entire savings at retirement as a lump sum. This made them susceptible to quickly depleting their retirement capital,” explains Mnisi. “The annuitisation requirement has always applied to retirement annuities and pension funds, but will now also be extended to provident funds.” This, he says, greatly increases the potential for members of provident funds to retire with dignity and reduces their reliance on the state or family members after retirement.

When it comes to withdrawal on emigration, retirement annuity members are now subject to a three-year lock-in period before they can withdraw their fund benefits, but the exact requirements for the new process are not yet known.

Mnisi says South Africans should understand that the ultimate aim of the retirement reforms is to incentivise more retirement savings and improve long-term retirement outcomes.

Ceasing taxing retirement products and extending tax deductions to provident fund members showed that government was prepared to forsake significant tax revenue to help people save for retirement. “This is a huge commitment from government. It is not aimed at the ‘nationalisation’ of retirement funds. In the long run, it will give the government more capacity to focus fiscal resources on economic, growth-enhancing projects.”