Budget 2014: Old Mutual commentary on retirement
"The increase in the tax free amount, from R315 000 to R500 000, is a significant and positive move," says Craig Aitchison, GM Corporate Customer Solutions at Old Mutual Corporate. This will have a positive effect of bringing tax relief to lower income members who did not benefit from deductible contributions.
Many people retiring from funds today are experiencing a drop in their income. A bit of tax relief on the lump sum helps them to receive an improved benefit to make adjustments to their lifestyle, such as paying off debt.
Aitchison also says that Government's commitment to seek improved coverage and preservation of retirement funds, and lower costs associated with these measures is a positive step for the industry.
"While government was firm in its intention to move towards a compulsory retirement system for all employed workers not part of an employee retirement fund, we need to see detailed plans in order to understand how this can help towards South Africans saving more."
Although strongly emphasising government's commitment to accelerated retirement reform and collaboration with the retirement industry, today's speech has not provided more clarity on the proposals introduced in 2013.
"The retirement industry has eagerly awaited progress on these proposals in order to understand how they will impact the various stakeholders in the industry"; says Aitchison.
He further comments that more work needs to be done to encourage a savings culture in South Africa, especially through the Small to Medium Enterprise engine (SME).
"While it is positive that government expressed its commitment to increase the support and tax relief for entrepreneurs and small businesses, a focused plan needs to now be implemented on how this is to be done. We look forward to further proposals on this issue in the future in order to clarify a supportive plan of action for this important engine of growth," concludes Aitchison.
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