PRESERVATION: OPTIONS FOR MOVING FORWARD IRF Conference | Dr David McCarthy | National Treasury 3 rd September

Preservation and portability Preservation seeks to address pre-retirement leakage caused by payments to: –members leaving pension and provident funds upon (voluntary) job changes –non-members in cases of divorce order settlements Preservation is the requirement that: –money saved for retirement through a pension fund or provident fund, should remain in such a fund until the person retires, or –should be rolled over into another similar retirement savings vehicle when a person changes jobs or receives a divorce order settlement (without incurring taxes or penalties) While the stated intention is to protect retirement funding through preservation and portability, there might be a need to allow access to the retirement benefits in some instances Proposal to be phased in giving consideration to protecting vested rights 2

Options for increased preservation Protection of vested rights: existing balance, existing balance plus growth, existing balance plus growth or new contributions, treatment of new members Options for increased preservation pre-retirement –Access to funds under certain circumstances (e.g. retrenchment) –Access to a certain portion of the funds (e.g. 1/3 rd treated as an advance on the retirement lump sum) –Access to all the funds, as currently, but increased withdrawal taxes –Access to none of the funds under any circumstances –A combination of the above Options for increased preservation post-retirement –Phasing in the same annuitisation requirements on provident funds as currently on pension funds Retirement funds should make preservation easy, cheap & automatic 3

THANK YOU 4