With many South Africans poorly prepared for retirement, government recently announced its proposed changes to legislation regarding retirement funds. The intention behind these changes is to encourage people to save more for their retirement and to make this process as simple and as tax effective as possible. The announcement however, has unfortunately created a lot of confusion and panic among the public with all changes now being delayed by National Treasury for possibly two years.
That being said, it is likely that these changes will still be implemented at a future date, making it important to understand the impact on your retirement portfolio:
This value may still be paid as a lump sum going forward and will not be subject to the one third limit that applies to contributions after implementation date (members of provident funds above the age of 55 at the implementation date will also still enjoy full access to their full benefit at retirement).
It is important to note that you will still be allowed to take your withdrawal benefits in cash. You also won't be required to keep your withdrawal benefits in a retirement fund when you change employers. Compulsory preservation of retirement benefits has not been implemented.
Perhaps the most important thing to be aware of however, is that government has stated that it does not intend to take control of or nationalise any pension funds. Its aim is rather to encourage all of us to take ownership of our retirement plans, and preserve and grow our wealth to make these plans possible.