#SONA2016: Retirement Reforms cannot be Postponed

Feb 12th, 2016

Rob Cooper, Chairman of the Payroll Authors Group of South Africa and Director of Legislation Updates and Proposed Legislation at Sage HR and Payroll

By Rob Cooper, Chairman of the Payroll Authors Group of South Africa and Director of Legislation Updates and Proposed Legislation at Sage HR & Payroll

The Payroll Authors Group of South Africa (PAGSA) has expressed concern about recent reports that indicate that the implementation of the new tax harmonisation and preservation rules for retirement funds may be once again postponed.

The organisation says that it believes these portions of the Taxation Laws Amendment Act should be introduced from 1 March 2016 as planned to create an environment of economic certainty and to encourage a culture of saving. These amendments were introduced following rigorous, democratic consultation with all stakeholders.

PAGSA furthermore warns that many of the country’s largest employers face an administrative nightmare if they need to roll back the changes they have already made to their payroll systems to cater for retirement reform. This could also complicate tax administration for SARS.

The implementation of the Act is the culmination of years of transparent and in-depth discussion between the National Treasury and its stakeholders including the labour organisations.  The legislation was initially enacted in December 2013, but implementation was delayed to allow for further consultation.

PAGSA is a non-profit organisation that represents suppliers of computerised payroll systems in South Africa. It was one of the stakeholders involved in the retirement reform discussions, particularly towards the end of the process.

Its members’ payroll systems have been changed, tested and mostly implemented at employers around the country to meet the 1 March 2016 deadline. Depending on special payroll run dates, some payrolls are already implementing the new legislation.

At this stage, it will be impossible for all payroll authors and large companies to change payroll systems back to the old law before 1 March 2016.  Payroll calculations and employment tax withholdings will be done according to the new law from 1 March 2016, resulting in a tax and administrative nightmare if the old law is reinstated.

PAGSA notes that the reforms are beneficial for most employers and employees that contribute to a retirement fund of any kind. The only people who may be disadvantaged are provident fund members who will – in limited cases – no longer be paid out their benefit on retirement in full as a lump sum.  They will receive only one third and the remaining portion will be re-invested for growth and to provide them with monthly annuity income.

PAGSA urges government to allay the ungrounded fears and rumours surrounding the reforms. It should communicate clearly to labour and retirement fund members that their rights to their investments in retirement funds are protected by law.

With the State of the Nation address in mind, PAGSA remains in full support of the implementation of the Taxation Laws Amendment Act on 1 March 2016.  Reversals of law of this nature could impact negatively on our economy at a sensitive time in our country – we need policy stability and economic growth, not the opposite.


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