Although it is not yet compulsory for an employer to provide a retirement fund to which employees can contribute, many South Africans are fortunate enough to have some exposure to a pension fund, provident fund or retirement annuity fund at some point in their lives – either as a member (enjoying the benefits of these retirement savings on leaving the fund) or as a beneficiary (such as a widow, child or other dependent of a member who passed away).
The final version of the Default Regulations to the Pension Funds Act, 1956, was signed into law by the Minister of Finance on 25 August 2017 and came into effect on 1 September 2017. The media statement issued by National Treasury together with the regulations explained that the regulations are “meant to improve the outcomes for members of retirement funds by ensuring that they get good value for their savings and retire comfortably”.
Following virulent opposition to the changes by the trade unions and increasingly widespread speculation regarding the implementation of the changes, the Ministry of Finance has now announced proposals for the delay of the annuitisation requirements for provident funds.
National Treasury has proposed changes to the law so that all retirement funds are treated the same. All contributions to pension, provident and retirement annuity funds will attract the same tax relief, subject to an annual cap. The requirement to purchase an annuity on retirement will be extended to all members of provident funds who are under the age of 55 on 1 March 2016. Samantha Davidson of Shepstone & Wylie’s pension law team explains that no vested rights will be affected and it is hoped that members of funds will receive wise counsel from their representatives to guard against the unfortunate mass resignations and withdrawals that were experienced last year.
In the evolving structure of umbrella funds, there are different views about management committees. Should the umbrellas have mancos at all? If so, should they be voluntary or mandatory? Who should sit on them? What should be their role and responsibilities? Industry opinion is divided.