1. Deciphering T-day and P-day Anton Swanepoel 19 August 2013

2. What and when is T-day and P-day? Proposals differentiate between 2 future dates: T-day and P-day From T-day, tax treatment of retirement fund contributions will be harmonised Also from T-day, only one-third of retirement benefit from provident fund may be taken as lump sum Draft Taxation Laws Amendment Bill, 2013 indicates T-day as 1 March 2015 From P-day compulsory preservation will apply upon withdrawal before retirement Not yet clear when P-day will be – not before 2015

3. Contribution deductibility from T-day From T-day employer contributions taxed as fringe benefits in employee’s hands Employee may deduct from tax contributions (incl. those paid by employer) to pension/provident/RA funds of up to 27,5% of the greater of remuneration and taxable income (excl. lump sum benefits) Annual ceiling of R350 000 Contributions in excess of limits, rolled over to future years

4. Contribution deductibility from T-day Current tax deductibilityT-day onwards Pension fundProvident fundRA fundPension, Provident and RA Employee contribution 7,5% of remuneration No deduction15% of non- retirement funding income 27,5% of greater of remuneration or taxable income, in respect of all contributions (incl. employer’s) to retirement funds Employer contribution 20% of approved remuneration Not applicableTaxable as fringe benefit in employee’s hands Monetary capNo R350 000 p.a.

5. Compulsory annuitisation from T-day At least two-thirds of retirement benefit from provident fund must be used to provide pension However, vested rights are protected, i.e. provident fund member may receive T-day balance and growth as lump sum upon retirement Provident fund members of 55 or older at T-day may commute full benefit upon retirement Provident funds must maintain separate accounts (for below 55 year olds) in order to separate pre-March 2015 contributions (and growth) and post-March 2015 contributions (and growth)

6. Compulsory annuitisation from T-day (cont.) Funds must select default pension product – retired member automatically gets this product, unless he/she requests otherwise Trustees must guide members through process of converting retirement benefit into a pension – give them access to independent financial advice paid for by fund Default pension can be provided inside or outside fund To lessen impact of new dispensation on provident fund members (a) means test for OAG phased out by 2016 and (b) commutation threshold increased from R75 000 to R150 000 from March 2015

7. Compulsory preservation from P-day From P-day withdrawal benefits must be preserved either in a preservation section of fund or a preservation fund Vested rights protected, i.e. member credits as at P-day and growth thereon can be withdrawn in cash Funds must identify default preservation option, i.e. preservation section in fund or preservation fund Exiting members must have access to independent financial advice paid for by fund – may elect transfer to new employer’s fund or other preservation fund

8. Compulsory preservation from P-day (cont.) From P-day a member who withdraws from service may annually withdraw the greater of OAG or 10% of preserved withdrawal benefit (excl. P-day balance and growth) However vested rights protected, i.e. member credits as at P-day and growth thereon can be withdrawn in cash Unused withdrawals may be carried forward to future years Vested rights also apply to money already in preservation fund as at P-day, unless one-off withdrawal option had been exercised