Is the government going to take our retirement savings?

There was a rumour a few weeks ago, that Government was going to take away people’s retirement savings. Fortunately it was just that, a rumour, with no truth to it. Government is, however, reforming the retirement industry and some confusion might have arisen as a result. The first of this reform is being implemented on 1 March 2015.
During the budget speech earlier this year, Treasury discussed some of the changes that they would be implementing and more clarity has since been provided.  As of 1 March next year, the current tax deductions applicable to retirement annuities (either 15% of non-retirement funding income; or R3500 less current pension fund contributions or R1750 – whichever amount is the greatest) will fall away, and the new tax deduction will be 27.5% of remuneration, to a maximum of R350 000 per annum. This is simplified compared to the current calculations. It is great news for those contributing to their employer fund and have a retirement annuity. It is also good news for those who have not made adequate provision for retirement.
Retirement annuities are a great way to save for retirement as the premium is tax deductible, the growth in the fund is tax-free and at retirement the tax free portion has been increased to R500 000.
The other big change is the annuitisation of provident funds. Currently employees can take the entire amount as a lump sum at retirement and do not need to purchase a compulsory income. Under the new dispensation, they cannot take more than a third as a lump sum and have to purchase an annuity with the remaining two thirds. This currently applies to pension funds and from 1 March 2015, it will also apply to provident funds. It will not be applied retrospectively historic vested rights will apply. Provident fund administrators will differentiate between the two funds, one fund for pre-1 March 2015 and one for post-1 March 2015.
Government is trying to encourage saving towards retirement and these changes is to incentivize the employed to make adequate provision. Have you made adequate provision? Have you allocated a portion of your income towards retirement savings? It is never too late to start.