Category Tax

Half way there - RFT cut by 9%

16 February 2006 Angelo Coppola

The news that the tax on retirement funds has been reduced from 18% to nine percent was generally well received by industry players.

Rene Otto CEO Channel Life: This is great news for the entry level market. The additional 9% can now be reinvested to ensure much needed additional funds during retirement. It is encouraging to see government's foresight benefiting our people, especially where a little extra money makes a big difference.

Old Mutual South Africa MD Roddy Sparks says the halving of Retirement Fund Tax from 18% - 9% will help to put more money into people's hands at retirement. "In total, members of pension funds and people with retirement annuities will this year have an extra R2.4 billion in their funds that would otherwise not have been there."

He says he is confident that this will improve the attractiveness of the long term savings industry, thereby making more South Africans self sufficient in their retirement years.

Sparks adds that he is delighted that the Minister has reiterated his commitment to the reform of the retirement fund industry. "We fully support the moves of National Treasury to reform the life industry and improve the benefits of customers."

Louis Rossouw - Head of Asset Consulting - Momentum Investments: All South Africans stand to benefit from the halving of the Retirement Fund Tax. Having done his bit to encourage individuals to save more for retirement, the Minister emphasised that the financial services sector should now play its part by offering the public attractive, affordable retirement savings vehicles.

Editors thoughts:
The news says that an ad hoc tax has been cut is good news although there are still some industry pundits wondering why this ad hoc tax is still being applied, especially as it affects all members of the population, and specifically hurts those whom the government has undertaken to uplift. And when one considers that there is a poor savings mentality in the country this tax seems even more at odds with the policy.

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