Cosatu welcomes stalling of plan on provident-fund payouts
The delay allows for more discussions on the government’s comprehensive social security document at Nedlac
Cosatu has hailed the Treasury’s decision to delay the implementation of the compulsory annuitisation of two-thirds of provident fund payouts as a "victory for workers".
Implementation of the measure, which Cosatu has fought against since it was first mooted, has been shifted from March 1 2018 to March 1 2019 in order for discussions on the government’s comprehensive social security document to take place within the National Economic Development and Labour Council (Nedlac).
This is the third postponement as the measure was to be introduced in 2015, but to allow for further consultations, was postponed to February 2016 in the face of stiff trade union opposition. It then was postponed again to 2018.
The postponement was announced by the Treasury’s director of personal income taxes and saving, Chris Axelson, during a briefing on Tuesday for Parliament’s standing committee on finance on the draft Taxation Laws Amendment Bill and the draft Tax Administration Laws Amendment Bill.
He said both labour and business supported a postponement, but he stressed the Treasury "still want to be very strong on this. We cannot let this continue, but we did believe we should allow this delay because of the delay in the discussion on the comprehensive social security paper", which was released only in November 2016. The proposal would require that two-thirds of withdrawals from provident funds on retirement be converted into an annuity with one-third being taken as cash. The aim would be to ensure workers preserved their savings, had an income in their old age and did not descend into poverty because they had used all their provident fund savings for once-in-a-lifetime purchases such as a home.
The measure would lead to provident funds being treated in the same way as other pension and retirement annuity funds. Provident-fund members would benefit from a tax deduction on contributions, a measure the Treasury implemented ahead of the compulsory annuitisation, although the two were supposed to be implemented together.
Cosatu retirement-fund co-ordinator Jan Mahlangu said: "We struggled, we fought and we campaigned against annuitisation, which cannot be elevated to be the single issue outside the comprehensive social security and retirement discussions taking place within Nedlac."