Budget 2016/17 – Provident fund transfer limitations

Budget 2016 finalFollowing on from the two year suspension of retirement reforms only relating to the compulsory annuitisation of provident funds to 1 March 2018, the Minister tabled certain interim measures affecting the transfer of amounts out of a provident fund through an urgent Revenue Laws Amendment Bill (Bill).

Apart from sterilising the compulsory annuitisation upon retirement for two years, it is proposed that any transfer to another retirement fund during the interim period, would result in any future contributions made by the employee, not being exempt from the compulsory annuitisation requirements. This proposal will surely place funds and members of those funds in limbo for two years.

Certain concessions have been made in respect of ‘forced transfers’ upon the closure of a retirement fund. There could, however, be two scenarios to consider – the one being a closure of the fund itself or secondly, where the employer ceases to be an employer. For employees resigning and transferring their accumulated capital to a preservation fund, there would be no effect on the basis that no further contributions would in any event be allowed into that preservation fund.

Special Edition Tax and Exchange Control Alert

 by Ruaan van Eeden

 

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