The Building Industry Bargaining Council (BIBC) has urged employers to inform employees of the current status quo regarding their tax and retirement obligations, following the recent announcements made in Minister Pravin Gordhan’s budget vote speech.
In recent months, there has been a lot of confusion on the ground regarding amendments which would have seen members of retirement funds able to only access a third of their funds as a lump sum cash payment upon retirement, while the balance would have had to be used to buy a pension in order to secure an ongoing income.
The belief – based on misinformation and misconceptions about the impact of the amendments – that people would not be able to access their savings down the line, had seen some employees considering resigning.
However, since Government has now postponed the annuitisation of Provident Fund retirement fund credits for two years, to allow more engagement with all stakeholders, there would be no marked change to the existing rules affecting employees. It should be noted that amendments to the tax treatment of contributions was not postponed and the increase of the maximum cash that may be taken as a lump sum at retirement will also go ahead on 1 March 2016.
“We urge employers to ensure their employees fully understand the implications of this postponement, as well as other rules and regulations that affect them, in order to ensure that no drastic decisions are made based on a misinterpretation of the tax environment post March 2016,” says Ronel Sheehan, Secretary for the Building Industry Bargaining Council (Cape of Good Hope).
She adds that all members will in due course receive a circular detailing which will explain in detail how tax regulations will impact individuals.
“There has been an unprecedented wave of retirement industry compliance over the past two years, and we would not want gains to be negatively impacted by misinformation or misunderstandings about tax requirements,” says Sheehan.
