General Issues

• The Taxation Laws Amendment Act, 2013 has significant implications for retirement funds. Members are concerned about what Government and policy makers intend doing with retirement fund monies. There are two aspects members need to appreciate. 1.) Provident fund lump sums on retirement will change over time. Contributions to provident funds after 1 March 2015 will be subject to the same rule as pension funds that only 1/3 can be commuted as a lump sum on retirement. However, members over 55 will not be affected and any benefit less than R150,000 can still be commuted in full. Contributions up to 1 March 2015 are unaffacted, so it will be some years before the effect of this change on provident fund retirement benefits has any meaningful effect. 2.) The preservation rules (on withdrawal before retirement) have not changed. There is discussion at NEDLAC on whether preservation should be a default or even enforced, but here again National Treasury has undertaken that any change will only affect future contributions when changes are made. Although members are practically unaffected by these issues for the time being, employers and trustees have a number of benefit and fund design considerations.

• The consolidation of retirememt funds and transfers to umbrella funds is a continuing trend. Employers are realising umbrella funds in many instances are in fact costing their employees more as opaque charging structures come to light. Concern about transparent charging has been voiced by National Treasury. Furthermore, eliminating the trustee board governance structure has not alleviated company responsibility but instead reassigned where responsibilities sit.

• The Financial Services Laws General Amendment Act, 2013 contains a number of revisions to the Pension Funds Act, 1956 that affect retirement fund governance. Fund trustees need to be aware of their increasing responsibilities because better governed funds is a key objective of retirement fund reform