Retirement Fund Focus: Budget 2023 – a little bit of sugar, but left us wanting more…
24 Feb, 2023

Retirement fund focus:

Budget 2023 – a little bit of sugar, but left us wanting more…

Leanne van Wyk, Director, ICTS Legal Services (Pty) Ltd

The good news – thank you Treasury!

Inflation-related adjustments to the retirement tax tables, which will increase by 10% from 1 March 2023
The tax-free amount at retirement increases to R550 000 (from R500 000).
The tax-free amount on withdrawal increases to R27 500 (from R25 000).
The changes to the tax tables may positively affect tax payable on a savings withdrawal (from savings pot).

The bad news

We really needed to see some of the finalised details on the two-pot system and see the wording of the legislation. Revenue Laws Amendment Act not issued. If we want to be ready for 1 March 2024, we need to be in a position to start preparing now. ☹
Treasury did not adjust the cap on contribution deductibility. ☹

Treasury’s retirement reform focus areas for 2023 – no surprises here

Conduct of Financial Institutions Bill to be tabled in Parliament early 2023.
Governance of umbrella funds (especially commercial umbrella funds): Treasury to publish proposals in 2023. Proposals may include new governance structures that include members, addressing locking in to a sponsor’s products and requirements for all funds about value for money measurement criteria and tools (which will drive further consolidation of funds).
Auto-enrolment: finalise policy proposals, including a voluntary and flexible savings scheme for informal workers.

Technical proposals

For individuals ceasing to be tax residents – proposal to apportion the annual limit on the deduction of the retirement funds contributions.
Require that the cash equivalent of the taxable benefit for employer retirement fund contributions be included in an employee’s income before a tax deduction is allowed.
Members of pension or provident funds who have reached the normal retirement age, but have not yet opted to retire and are transferred off the fund, will be able to transfer on a tax neutral basis if the transfer is from a less restrictive to a more restrictive retirement fund.

Other matters on Treasury’s radar

Unclaimed assets: further consultation on the FSCA recommendations will take place in 2023, with a final paper being published in 2024.
Financial education policy: in 2023 Treasury will publish a consumer financial education policy document for public comment.
Information technology governance and cyber risk management: to mitigate IT and cyber risks to companies and consumers, the FSCA and the PA to soon finalise these joint standards.
Transformation and financial inclusion: the FSCA issued the draft Transformation Strategy, for financial institutions, for public comment on 28 February 2022. Treasury expects the final strategy will be published by the FSCA in March 2023.

ENDS

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