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“One of the aims of retirement reform is to create a uniform retirement fund system for all types of retirement savings vehicles, such as pension, provident and retirement annuity funds. This will allow all members to receive the same tax treatment of the money contributed and how benefits can be paid at retirement." says Dolana Conco, regional executive, consulting at Alexander Forbes.
Many reforms have been implemented over the last few years, but it has been a long journey for this next vital step. “The changes are beneficial for most retirement fund members and encourage greater savings for retirement and address issues in the retirement system.
“Currently provident fund members can take their retirement benefit as a full cash lump sum and do not have to buy a pension (annuity) from a registered insurer when they retire. However, pension fund members must use at least two-thirds of their retirement benefit to buy a pension, unless the total benefit is less than R247,500.”
From 1 March 2021, retirement benefits from provident funds will be treated in the same way as pension funds for the part of the benefit based on contributions. Conco explains that the changes for provident fund members are: