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PRESERVATION: OPTIONS FOR MOVING FORWARD

PRESERVATION: OPTIONS FOR MOVING FORWARD. IRF Conference | Dr David M cCarthy | National Treasury 3 rd September 2012. Preservation and portability. Preservation seeks to address p re-retirement leakage caused by payments to:

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PRESERVATION: OPTIONS FOR MOVING FORWARD

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  1. PRESERVATION: OPTIONS FOR MOVING FORWARD • IRF Conference | Dr David McCarthy | National Treasury • 3rd September 2012

  2. Preservation and portability Preservation seeks to address pre-retirement leakage caused by payments to: members leaving pension and provident funds upon (voluntary) job changes non-members in cases of divorce order settlements Preservation is the requirement that: money saved for retirement through a pension fund or provident fund, should remain in such a fund until the person retires, or should be rolled over into another similar retirement savings vehicle when a person changes jobs or receives a divorce order settlement (without incurring taxes or penalties) While the stated intention is to protect retirement funding through preservation and portability, there might be a need to allow access to the retirement benefits in some instances Proposal to be phased in giving consideration to protecting vested rights

  3. Options for increased preservation • Protection of vested rights: existing balance, existing balance plus growth, existing balance plus growth or new contributions, treatment of new members • Options for increased preservation pre-retirement • Access to funds under certain circumstances (e.g. retrenchment) • Access to a certain portion of the funds (e.g. 1/3rd treated as an advance on the retirement lump sum) • Access to all the funds, as currently, but increased withdrawal taxes • Access to none of the funds under any circumstances • A combination of the above • Options for increased preservation post-retirement • Phasing in the same annuitisation requirements on provident funds as currently on pension funds • Retirement funds should make preservation easy, cheap & automatic

  4. THANK YOU

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