THE TAXATION LAWS AMENDMENT ACT 2020

by | Mar 1, 2021

There has been much speculation about the anticipated changes to pension savings during the past couple of years, especially with regard to South African taxpayers considering emigration or who have emigrated and require access to their retirement funds.

Please see below a summary of the changes highlighted in the article.

Provident funds and Provident Preservation funds.

The changes to provident funds and provident preservation funds were signed into law on the 21st January 2021 and will come into effect on the 1st March 2021.

From 1st March 2021 the same annuitisation rules that apply to members of pension funds, pension preservation funds and retirement annuity funds will apply to members of provident funds and provident preservation funds.

The attached article by Alexander Forbes Legal Services department, explains how legislation will protect the accrued rights of a provident fund and a provident preservation fund in the form of vested benefits following the implementation of the new rules in March this year.

An important distinction is made in the legislation between members of these funds who are under age 55 and those who are age 55 and over on the 1st of March 2021.

The new rules also make mention of lump sum disability benefits, contributions to funds which are paid later than the 1st of March 2021 and transfers within the same fund and between funds.

Emigration

The changes will also affect emigrants from South Africa who wish to make lump sum withdrawals from preservation funds or retirement annuities upon emigration.   Access to retirement funds will be restricted until the South African tax resident (as defined by the Income Tax Act), has remained a tax non-resident for at least three consecutive years or longer.

Alexander Forbes Legal Services  document explains in detail how the new laws  will affect Pension funds in the future.