Taxation Laws Amendment Act: A summary for under-55s

On the 1st of March 2021, the new tax laws came into effect and we want to let you know how the changes will affect you.

If you are a member of SURF (Pension Section) or SURF (Managed Pension Section), these changes will have no impact on your retirement savings. However, as always, we want to keep you informed and so that you can make the best choice for yourself and your financial future.

So what has changed?

Because you are younger than 55 on the 1st of March 2021, these tax changes have an impact on your retirement plan.

From the 1st of March 2021, retirement benefits from provident funds (that is, SURF (Provident Section) or SURF (Managed Provident Section)) have been completely aligned to pension funds, so the way you receive your savings at retirement will change.

How does it affect you?

1. All contributions made before the 1st of March 2021, including past and future growth, will be treated the same as before – this amount is known as your vested rights. On the day you retire, you can receive this part of your retirement benefit as a cash lump sum (which will be taxed), or use as much of it as you like to buy a pension (also known as an annuity). Or you can split it to do both.

2. The new rules will only be applied to contributions made after the 1st of March 2021. At retirement, one-third of those contributions and the growth on those contributions can be taken as a cash lump sum (which will be taxed), and the remaining two-thirds must be used to buy a pension. These are also called non-vested rights. If your non-vested rights is less than R247 500, you can take the amount as a taxable cash lump sum.

Your retirement benefit is therefore the sum of vested rights and non-vested rights.

Wrapping it up

These tax changes may seem scary, but if you take a long-term view (as you should with retirement planning), you may realise that these changes are in your best interests. Focus on contributing as much as you can to secure a comfortable retirement.

Remember that until the 1st of March 2021 all your contributions, and growth on those contributions, will be treated the same as before; only contributions made thereafter will be affected by the new rules. If you need guidance on your journey to a comfortable retirement, get in touch with a SURF retirement benefits counsellor, who will help educate and empower
you to choose the direction that is best for you.

Any questions?

If you need help understanding any of the content described in this document, please contact the retirement benefits counsellor for more information. There is no charge for this service, and you will not be sold any Sygnia products. Remember, financial advice cannot be replaced by retirement benefits counselling. Ask your employer to facilitate a retirement benefits counselling session or send an email to surf@srf.sygnia.co.za or call 010 595 0574.

Accessing information on your mobile has never been easier

SURF’s USSD service allows you to view the latest value of your retirement savings and/or request a callback from the retirement benefits counsellor. To use this service, simply dial *120*794642# (*120*SYGNIA#) and complete the two-factor authentication process. You will be able to access real time information at your fingertips, even if you do not have a smartphone or access to a computer.