Any tax boffins out there, provident fund question





Page 1 of 2 1 2 LastLast
Results 1 to 20 of 21
  1. #1
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Any tax boffins out there, provident fund question

    A few years ago in about 2014 or 2015 government wanted to change the regulations around provident fund with drawls. At the time regulations allowed you to with draw your entire provident fund. They wanted to change it so that you could only with draw 1/3 and the other 2/3s have to be reinvested.
    I understand the unions objected and they halted this regulation, and then government said they would roll it out in phases. Does anyone know the actual cut off date for this new regulation.
    Any my 2nd question...I have a smaller preservation fund from a previous job in 2008 which is long before the above cut off date. If I merge that fund with my current and active provident fund, do I lose the a utility to with draw 100% of this smaller amount when I retire in 15 years, or would I have to comply with the 1/3 rule as it is ow seen as one larger fund?
    My understanding is that any contributions made before the above cut off date is not subject to the 1/3 rule.

  2. #2
    Join Date
    Jul 2015
    Location
    Kloof
    Age
    63
    Posts
    338
    Thanked: 770

    Default Re: Any tax boffins out there, provident fund question

    To the best of my knowledge, these changes are all still proposals. Personally, I do not see them ever being implemented because access to these funds is often the only safety net retrenched workers have. Hence the union's would fight such legislation tooth and nail.

    There is a general principle in law that legislation cannot be retrospective. So if something like this was ever introduced, all contributions (and hopefully the growth thereon) made before the cut off date would be ring fenced.

    But one cannot predict what a future government might do.

    2015 Suzuki Grand Vitara Summit M/T

  3. The Following User Says Thank You to Ian.McM For This Useful Post:


  4. #3
    Join Date
    Mar 2008
    Location
    De Wildt
    Age
    56
    Posts
    34,153
    Thanked: 9369

    Default Re: Any tax boffins out there, provident fund question

    Good to know, considering my age and possible retrenchment. Because I'd like to pay off that pesky bond.
    2012 Jeep Sahara Unlimited 3.6 V6
    Percivamus

  5. #4
    Join Date
    Sep 2006
    Location
    Loevenstein, Bellville
    Age
    39
    Posts
    2,313
    Thanked: 332

    Default Re: Any tax boffins out there, provident fund question

    There are two aspects to consider. The first is on exit prior to retirement. The concept of compulsory preservation is a noble one to protect individuals against themselves but the idea was/ is to allow cash withdrawals in certain circumstances. At the moment it is just an idea in a concept document.

    The second aspect is compulsory preservation on retirement, similar to pension funds where you may take up to 1/3rd in cash and have to buy an annuity with the rest. The idea is to align pension and provident funds entirely. That legislation is currently in place but implementation gets pushed out every year. Unions in particular are against this.

    And as mentioned, legislation should only apply prospectively with existing rights remaining in tact.
    Niel
    2012 BMW F800GS
    2010 Nissan Navara 2.5 dCi 4x4
    2015 Bush Lapa Miskruier (B503)

  6. #5
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by Musashi View Post
    There are two aspects to consider. The first is on exit prior to retirement. The concept of compulsory preservation is a noble one to protect individuals against themselves but the idea was/ is to allow cash withdrawals in certain circumstances. At the moment it is just an idea in a concept document.

    The second aspect is compulsory preservation on retirement, similar to pension funds where you may take up to 1/3rd in cash and have to buy an annuity with the rest. The idea is to align pension and provident funds entirely. That legislation is currently in place but implementation gets pushed out every year. Unions in particular are against this.

    And as mentioned, legislation should only apply prospectively with existing rights remaining in tact.
    So are you saying the rule is not yet enforced? Hypothetically i will still be able to draw my entire provident as the 1/3 rules for provident are not enforced?

  7. #6
    Join Date
    Sep 2006
    Location
    Loevenstein, Bellville
    Age
    39
    Posts
    2,313
    Thanked: 332

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by WayneMan View Post
    So are you saying the rule is not yet enforced? Hypothetically i will still be able to draw my entire provident as the 1/3 rules for provident are not enforced?
    I wouldn't use the word enforced. The legislation has been promulgated as being effective from a date as determined in regulations. The regulations postpones the implementation date every year. So the legislation, while technically in force, is not effective yet. If that makes sense. In any year they can update the regulations to make the legislation effective. However, given the push back from unions and the perceived lack of communicating the intention to make this effective, I don't see it happening any time soon.

    But basically yes, you can take your entire provident fund benefit in cash at retirement. (Just be careful, you'll pay tax on it.)
    Niel
    2012 BMW F800GS
    2010 Nissan Navara 2.5 dCi 4x4
    2015 Bush Lapa Miskruier (B503)

  8. #7
    Join Date
    Apr 2010
    Location
    Garsfontein
    Age
    40
    Posts
    1,268
    Thanked: 486

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by WayneMan View Post
    A few years ago in about 2014 or 2015 government wanted to change the regulations around provident fund with drawls. At the time regulations allowed you to with draw your entire provident fund. They wanted to change it so that you could only with draw 1/3 and the other 2/3s have to be reinvested.
    I understand the unions objected and they halted this regulation, and then government said they would roll it out in phases. Does anyone know the actual cut off date for this new regulation.
    Any my 2nd question...I have a smaller preservation fund from a previous job in 2008 which is long before the above cut off date. If I merge that fund with my current and active provident fund, do I lose the a utility to with draw 100% of this smaller amount when I retire in 15 years, or would I have to comply with the 1/3 rule as it is ow seen as one larger fund?
    My understanding is that any contributions made before the above cut off date is not subject to the 1/3 rule.
    There is no implementation date yet for making provident funds the same as pension funds.

    You cannot merge your provident preservation fund with anything, at most you can move it to a different provider.

  9. #8
    Join Date
    Aug 2013
    Location
    Cape Winelands
    Age
    40
    Posts
    827
    Thanked: 247

    Default Re: Any tax boffins out there, provident fund question

    Correct me if I'm wrong, but is the rule still thatyou can take the 1st 500k tax free at retirement & the rest will be taxed, any withdrawels before retirement will be deducted from that R500k tax free benefit?
    2004 Ranger 4000 V6 Auto (Weekender & Heavy loads)
    2011 BMW X1 Auto (My Mommy-Wagon)
    2011 CashCow 1.6 (Swambo)

  10. #9
    Join Date
    Apr 2010
    Location
    Garsfontein
    Age
    40
    Posts
    1,268
    Thanked: 486

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by Kamakazi View Post
    Correct me if I'm wrong, but is the rule still thatyou can take the 1st 500k tax free at retirement & the rest will be taxed, any withdrawels before retirement will be deducted from that R500k tax free benefit?
    Yeah, something like that

  11. #10
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by supersunbird View Post
    There is no implementation date yet for making provident funds the same as pension funds.

    You cannot merge your provident preservation fund with anything, at most you can move it to a different provider.
    Thanks

    I have been told that my preservation fund hosted at Alan Gray can be paid to my current provident fund at my current employer. Alexander Forbers who manage the provident and Alan Gray have both said it's possible. There are no tax implications as I dont see any of the money, it goes straight into my active provident.

  12. #11
    Join Date
    Apr 2010
    Location
    Garsfontein
    Age
    40
    Posts
    1,268
    Thanked: 486

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by WayneMan View Post
    Thanks

    I have been told that my preservation fund hosted at Alan Gray can be paid to my current provident fund at my current employer. Alexander Forbers who manage the provident and Alan Gray have both said it's possible. There are no tax implications as I dont see any of the money, it goes straight into my active provident.
    I read up and indeed you can move a provident preservation fund to a provident or pension fund.

  13. #12
    Join Date
    Mar 2008
    Location
    De Wildt
    Age
    56
    Posts
    34,153
    Thanked: 9369

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by supersunbird View Post
    I read up and indeed you can move a provident preservation fund to a provident or pension fund.
    Quote Originally Posted by WayneMan View Post
    Thanks

    I have been told that my preservation fund hosted at Alan Gray can be paid to my current provident fund at my current employer. Alexander Forbers who manage the provident and Alan Gray have both said it's possible. There are no tax implications as I dont see any of the money, it goes straight into my active provident.
    yep, as long as you move it into a proper RA there is no tax or other issues
    2012 Jeep Sahara Unlimited 3.6 V6
    Percivamus

  14. #13
    Join Date
    Jul 2015
    Location
    Kloof
    Age
    63
    Posts
    338
    Thanked: 770

    Default Re: Any tax boffins out there, provident fund question

    You can move a provident or pension preservation fund into a pension preservation fund (or RA). You used not to be able move a preserved pension into a provident fund of any nature, although this may have changed since TY 2017. At that stage it became permissible to deduct provident contributions from your remuneration in determining the taxable income on which your PAYE is deducted. Any amounts not allowed as deductions in a given year are carried forward to the following year, and when you finally retire, any amounts not previously allowed as a deduction will be deducted from any lump sum withdrawal before it is considered for taxation.

    This is a rather complex area, and one that could have a material financial impact on any withdrawal. One probably needs to sit down and construct a timeline with all your actual pension and provident fund investments and consider the impact. Generalisations could be misleading.
    Last edited by Ian.McM; 2019/07/17 at 02:36 PM.

    2015 Suzuki Grand Vitara Summit M/T

  15. The Following User Says Thank You to Ian.McM For This Useful Post:


  16. #14
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by Ian.McM View Post
    You can move a provident or pension preservation fund into a pension preservation fund (or RA). You used not to be able move a preserved pension into a provident fund of any nature, although this may have changed since TY 2017. At that stage it became permissible to deduct provident contributions from your remuneration in determining the taxable income on which your PAYE is deducted. Any amounts not allowed as deductions in a given year are carried forward to the following year, and when you finally retire, any amounts not previously allowed as a deduction will be deducted from any lump sum withdrawal before it is considered for taxation.

    This is a rather complex area, and one that could have a material financial impact on any withdrawal. One probably needs to sit down and construct a timeline with all your actual pension and provident fund investments and consider the impact. Generalisations could be misleading.
    Indeed that does sound complicated

  17. #15
    Join Date
    Apr 2010
    Location
    Garsfontein
    Age
    40
    Posts
    1,268
    Thanked: 486

    Default Re: Any tax boffins out there, provident fund question

    Quote Originally Posted by WayneMan View Post
    A few years ago in about 2014 or 2015 government wanted to change the regulations around provident fund with drawls. At the time regulations allowed you to with draw your entire provident fund. They wanted to change it so that you could only with draw 1/3 and the other 2/3s have to be reinvested.
    I understand the unions objected and they halted this regulation, and then government said they would roll it out in phases. Does anyone know the actual cut off date for this new regulation.
    Any my 2nd question...I have a smaller preservation fund from a previous job in 2008 which is long before the above cut off date. If I merge that fund with my current and active provident fund, do I lose the a utility to with draw 100% of this smaller amount when I retire in 15 years, or would I have to comply with the 1/3 rule as it is ow seen as one larger fund?
    My understanding is that any contributions made before the above cut off date is not subject to the 1/3 rule.
    I just remember something now, that you must consider, once you have it in the active provident fund you cannot take it out again if unhappy with the performance or fees of the current provident fund manager which is linked to your employment.

    There was recently a thread on MyBroadband forum about an instance where the guy put his previous employers provident fund money into the new employers provident fund, and now he is unhappy with the fund.

    If it was me I'd keep it separate in the preservation fund, at provider of choice, even if that is same provider as employer fund. There is really no benefit to merging, it's not like it costs more, except possibly if merging will definitely save you on costs because you then move to a bigger amount where the provider then has lower fees that apply, like funds with a value of over R1 mil get charged 0.4% in fee vs 0.6% in fees for funds under R1 mil.

    Also if separate, at retirement you can leave the one (or more) preservation fund (or whatever other type of fund) to continue growing in capital amount until you need/want it, while getting a pension from the other fund/s.

  18. The Following 2 Users Say Thank You to supersunbird For This Useful Post:


  19. #16
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    That's my debate at the moment. The driver behind this is to save costs
    I get very good rates working at a financial institution compared to the average guy.
    And then someone also suggested leaving them separate so that at retirement age I can leave one to grow while with drawing from the other.
    But the debate is whether to do that or merge them and save costs, taking into account the 1/3 rule.

  20. #17
    Join Date
    Jul 2015
    Location
    Kloof
    Age
    63
    Posts
    338
    Thanked: 770

    Default Re: Any tax boffins out there, provident fund question

    The tax free amount linked to the 1/3 rule does not apply per fund, but is given to an individual for his lifetime. So I cannot see that as a valid consideration?

    2015 Suzuki Grand Vitara Summit M/T

  21. #18
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    What i meant by that is if I merge the 2 funds and the pension fund 1/3 rule also applies to provident, then will I lose the ability to with the 100% of the old fund once they are merged? Remember that my old privedent is pre the proposed 1/3 rule they want to apply to providents. Will I sacrifice that ability to with draw it all ( the old fund amount) in the future.

  22. #19
    Join Date
    Jul 2015
    Location
    Kloof
    Age
    63
    Posts
    338
    Thanked: 770

    Default Re: Any tax boffins out there, provident fund question

    As I said in a previous post, I don't think the legislation would ever be retrospective. So even your current fund should have the before implementation portion ring fenced from post implementation contributions and growth.

    Certainly, if your fund trustees and administrator are even half awake they would make very sure you effectively have two accounts - one for before and one for after.



    One never knows, of course, what government might do. But it could well be something none of us have ever thought of.

    2015 Suzuki Grand Vitara Summit M/T

  23. The Following User Says Thank You to Ian.McM For This Useful Post:


  24. #20
    Join Date
    Jan 2010
    Location
    Gauteng
    Age
    44
    Posts
    463
    Thanked: 55

    Default Re: Any tax boffins out there, provident fund question

    Thanks Ian

Page 1 of 2 1 2 LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •