FIA: Government meets its retirement planning commitment

After extensive negotiations with all participants in the financial services sector, including the Financial Intermediaries Association (FIA) and its predecessors, regarding the benefits and costs applicable to contractual savings, Government has, towards the end of July 2008, played its part by taking the decision to implement consumer friendly amendments to retirement planning tax law. “These changes now regularise and rationalise the retirement solutions developed over the years by our innovative industry,” says Arnold van der Linde (pictured), president of the FIA, an association representing the elite of the country’s independent brokers. “These solutions sometimes pushed existing law to the limit and legislation aimed at setting related parameters, encouraging welcome competition and ironing out inconsistencies was therefore necessary.”

Revisions to retirement planning laws now include:

• Retirement Annuities – fund members are now, for the first time, able to change administrators, retire beyond the age of 70 and take a small taxable paid up sum (under R7 000) prior to retirement age, if required. The authorities have also removed the biggest objection to young professionals investing in retirement annuities by allowing people who emigrate to redeem their retirement annuity savings in full.
  
• Preservation Funds – individuals changing careers are now able to choose a preservation fund of their own choice without pre-approval from their employer, belong to a preservation fund, irrespective of their employment status (preservation fund membership has, historically, not been offered to the self-employed) and benefits accruing to non-member spouses in terms of a divorce order can now also be placed in these retirement vehicles.
  
• Living Annuities – an allowance, which enables members to commute small living annuities for cash lump sums, has now been incorporated and annuitant beneficiaries are able to receive benefits in the form of a taxable lump sum.

These amendments, which increase retirement planning flexibility, also bring with them an increased risk of fund members making errors in their retirement planning. “Mistakes could have serious long-term financial consequences and it is therefore essential that fund members include their financial planners in the decision making process,” concludes van der Linde.