From 1 March 2015 premiums for disability income policies will no longer be tax deductible for employees. However, the income payable to an employee who is declared disabled will be tax free.
Currently the premium for the disability benefit is deducted from your total contributions, but from 1 March 2015 the full employer contribution will be applied for retirement benefits under the fund. Your premium for disability income benefits will become a separate after-tax deduction from your pay – resulting in a small reduction in your take-home pay, but you will save more for retirement.
The reduction in your take-home pay is compensated for the following:
Currently, the rules governing the tax deductibility of contributions to pension, provident and retirement annuity funds are very different, but from 1 March 2015 these retirement savings vehicles will all enjoy the same tax treatment with regard to contributions and retirement benefits.
As from 1 March 2015, members of provident funds will only be allowed to take one third of their benefit at retirement as a cash lump sum payment. The balance of the benefit must be used to buy a pension to provide an income to the member after retirement.