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Zuma moves to calm waters over provident funds

After Cosatu warns its support for ANC may wane if compulsory annuitisation is enforced.

JOHANNESBURG – President Jacob Zuma has moved to calm the waters after the Congress of South African Trade Unions (Cosatu) demanded that the new regulations that will compel provident fund members to annuitise be scrapped.

Zuma signed the Tax Administration Laws Amendment Act and the Taxation Laws Amendment Act into law earlier this month. The regulations, which will harmonise the taxation of contributions to pension funds, retirement annuities and provident funds, will take effect on March 1.

This means that provident fund members will only be able to take one third of their pension benefit as a cash lump sum at retirement and that the remaining two thirds will have to be annuitised. However, this will only apply to contributions made after March 1 and for those below 55 years of age. Members will only be required to annuitise once their retirement savings exceed an amount of R247 500. The previously proposed threshold was R150 000.

Provident fund members could previously take their full pension benefit as a cash lump sum at retirement. Pension and retirement annuity funds are already required to annuitise and won’t be affected by this particular change.

The regulations were initially scheduled for implementation in March last year but were postponed amid concerns that members would not have access to their pension benefits prior to retirement once the new regulations were introduced. This fuelled premature resignations to access retirement funds.

Trade unions also wanted more clarity on social security.

In a statement issued on Thursday, the Presidency said Zuma “did not act unilaterally when signing the Tax Administration Amendment Act”.

“The law was considered at Nedlac [The National Economic Development and Labour Council]. It was also discussed openly in Parliament. It was passed by both the National Assembly and the National Council of Provinces following public hearings.”

The president’s statement comes after national spokesperson for Cosatu, Sizwe Pamla, said by signing the Act the president has poisoned the relations between the ANC-led government and the workers.

“He further weakened the alliance and has given considerable comfort to our enemies. This will do nothing to disprove the assertions and suppositions that the movement panders to the left during vote harvesting periods and delivers to the right afterwards.

“This will complicate the campaigning for the upcoming local government elections because workers will also find it hard to be persuaded to vote against their interests.

“It is unacceptable that when we ask to be given a comprehensive social security and retirement reform discussion paper, which government has failed to deliver for more than ten years, we get given the Taxation Laws Amendment Act; and when we take this process to Nedlac, where government is presented by National Treasury, they abandon the engagements to pursue their planned retirement reforms unilaterally,” Pamla said in statement.

Workers will fight any attempts to impose the compulsory preservation of their hard-earned deferred wages, he said.

Pamla said the implementation of the legislation would have dire and lasting consequences on the relationship between government and the workers.

The issue would be at the top of the list of priorities to be discussed by the upcoming Central Executive Committee (CEC) meeting of Cosatu next month.

“The CEC will guide the federation on the rolling out of a massive campaign against this nationalisation of worker’s pensions,” added Pamla.

The Presidency said provident fund members would, similar to members of pension and retirement annuity funds, now also be able to claim a tax deduction on their contributions. It is estimated that around half of the more than 2.5 million provident fund members will see an increase in their take-home pay as a result.

“The reforms do not take away the right of provident fund members to their benefits before or at retirement. Instead, the reforms enable a slower use of such benefits in retirement, by requiring annuitising from a certain amount.

“The data indicates that 83.5% of provident fund members fall in the R160 000 and below income bracket, and that the majority of them retire with an average retirement benefit of R300 000 (note that this average includes higher income members). These data, coupled with [the] protection of vested rights and a higher de minimis amount of R247 500 (i.e. the amount below which you do not require annuitising) leads to the second point that most, if not all, low income earners approaching retirement in at least the next two to five years (and longer), will not be required to annuitise,” the Presidency said.



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I would be surprised if Zuma does not dip into all pension and provident funds as SA goes down the tubes and continues it’s path to bankruptcy. The IMF will surely not lend to a Zuma government so where else is he going to get money to pay for his needs and the needs his friends and cronies(apart from the ongoing raiding of taxpayer money which we all know about) ?

This was done in Namibia. “Allegedly” They called it Reg 28 and they forced all pensions funds to invest 5% into gov initiatives. Sam Nujoma and 5 chronies got the tenders allegedly on these and about 640 million disappeared. Even the taxi drivers in Windhoek were talking about it. The report was swept under the table and nobody talks about it.

Or why not force Government Employees Pension to adopt a developmental investment policy to invest in roads, power, schools, hospitals etc. so that Government can wash their hands off these areas?

Oh its already been implemented?

Zuma and the ANC have already started to dip into state pension and provident funds as Zuma and the ANC corrupt push SA closer to bankruptcy.

With his nonsense actions over the MinFin, Zuma already smashed into the retirement savings of everyone in a pension or provident fund, including the GEPF. The rand is in free fall, and stock markets seem to be following. Does Zuma not understand the mechanics of this? Clearly not.

In other words there should be even more retirees in the next 2-5 years whose life savings are too small to require annuitising.

Does anybody believe the double-humped shower-head?

I have said it before . ANY annuity is a curse as one is not in control of one’s money . Rather invest Privately in the same Unit trusts . That way if one wants to up and Emigrate you can take everything with you .

Why do the unions keep on pushing for social security. Are they thinking about what they have in the USA? That is paid for by 6.2% of earnings from each of the employer AND THE EMPLOYEE. And at the end of it, they get a pension, not a lump sum. That sounds exactly like what they are complaining about with the current proposals here.

Do they think that comes free?

So… Zuma chooses the minister of finance (Van Rooyen, Gordon etc.).

The minister of finance selects the trustees of the GEPF. That way, the presidency can control the retirement promises made to state workers.

The deputy minister of finance, who reports to the minister of finance, is the chairperson of the public investment corporation that manages the money for the GEPF. That way, the presidency can control the cash and how it is invested.

The Scorpions would have surely picked this up!

Following his unprecedented display of his very limited skills in cementing the South African economy in December with his multiple appointment of his ‘skilled’ comrades, there will never again be an action from Mr. Zuma which will not be questioned or doubted.

Time is now tom take your fingers out of the cookie jar and step down!

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