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Budget 2013 – what will it hold for financial planners?

22 February 2013 Geraldine Macpherson, Liberty

It is that time of year again and we wait, in eager anticipation, for what the Minister has to say in his address on the 26th of February. When it comes to retirement planning in particular there has been a great deal of discussion as well as proposals pu

Retirement planning:

On our wish-list when it comes to retirement planning, as a minimum:

• Confirmation of the base upon which the tax deductibility of contributions to funds will be based. Will the proposed 22.5% (or 27.5% for over 45 year olds) be based on taxable income, remuneration or something else? We hope that the Minister will clarify this issue.

• The future of provident funds – while National Treasury have mentioned that there are essentially three options that they are considering, we hope that the Minister identifies which option will be adopted, so that members on provident funds can have some certainty as to the road forward and ensure that their retirement plan is congruent with that. We would like to see strong grandfather principles applied, as this would be in keeping with the concept of fairness and would also hopefully put paid to the practice of “false” withdrawals in order to gain access to and “lock in” current commutable values.

• Living annuities (Investment linked annuities): Again we are hoping for certainty about the future of the products that are currently being widely marketed and bought. Both financial advisers and clients need to be sure of the product that so many people are relying on to provide for their income requirements upon retirement.

• Compulsory preservation: We hope that the minister illustrates the will to impact on the too common practice of simply cashing fund benefits in on resignation or divorce and that policy is made to ensure that where feasible, all members preserve their benefits on withdrawal, as much as reasonably possible.

Estate Duty:

Estate duty and the potential abolition thereof remains on the radar for many financial planners and estate planners, and while we hope that in the future it will in fact be abolished, especially given the increased effective rate of CGT, we do not anticipate it happening in this year’s budget.

Interest exemption:

We would also certainly like to have certainty on the future of the interest exemption, as this plays such a large role in the financial planning of so many retirees. Ideally, we hope that NT decides to keep the exemption, but if that is not going to be the case, the sooner we know the outcome the better as it will allow time for effective alternative planning.

Long Term Insurance:

Last year the Minister mentioned that taxation of the business of Long Term Insurers would be re-visited, and we believe that there may be more detail on this in the 2013 budget speech.

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