Taxation Laws Amendment Act: A summary for over-55s

On the 1st of March 2021, the new tax laws came into effect and we want to let you know how the changes will affect you (if at all).

If you are a member of SURF (Pension Section) or SURF (Managed Pension Section), these changes will not affect your retirement savings. If you change jobs, are retrenched or dismissed, nothing changes – you still have access to your retirement savings. We want to keep you informed and help you make the best choice for yourself and your financial future.

So what changed?

From the 1st of March 2021, retirement benefits from provident funds (that is, SURF (Provident Section) or SURF (Managed Provident Section)) (SURF) have been completely aligned to pension funds. This means that the way you receive your savings at retirement may change, specifically how much of your retirement benefit you can receive as a taxable cash lump sum.

If you are 55 or older, these changes will only affect you if you leave SURF and join a
new retirement fund after the 1st of March 2021.

How does it affect you?

1. If you remain a member of SURF until the day you retire: nothing changes.

On the day you retire, you can receive your savings at retirement as a cash lump sum
(which will be taxed), or use as much of it as you want to buy a pension. Or you can
split it to do both. This amount is also known as your vested rights.

If you joined SURF exactly on 1 March 2021, then your contributions and the
growth on those contributions will also be treated as vested rights.

2. If you leave SURF and join a new retirement fund after the 1st of March: something changes.

The contributions that you made to SURF until the date you joined your new fund, plus all past and future growth, can still be received as a lump sum when you retire (which will be taxed), or you can use as much of it as you want to buy a pension. Or you can split it to do both. This amount is also known as your vested rights.

However, all the contributions made from the date you join the new fund and the growth on those contributions will be treated like benefits from a pension fund (these are also known as your non-vested rights):

• A maximum of 1/3 can be taken as cash, and the balance must be used to by a pension (also known as an annuity).

• If your total non-vested rights is less than R247 500, you can take the amount as a taxable cash lump sum.

Similarly, if you joined SURF after 1 March 2021 then your contributions and the growth on those contributions will also be treated as non-vested rights.

Vested versus non-vested rights, what’s the difference?

Your vested rights are all the contributions you and your employer have made to SURF plus past and future growth on those contributions. If you joined SURF on 1 March 2021, the vested rights also include these contributions and all future growth on those contributions. Vested rights can still be taken as a taxable cash lump sum when you retire from SURF.

Non-vested rights only apply if you leave SURF and join a new retirement fund after 1 March 2021. Non-vested rights include all the contributions you make, plus growth on those contributions, from the date you join the new fund. Non-vested rights cannot be taken as a cash lump sum (unless the total value is under R247 500).

Non-vested rights also apply if you joined SURF after 1 March 2021, as your contributions and the growth on those contributions will be treated as non-vested rights.

Your retirement benefit is therefore the sum of vested rights and non-vested rights.

Wrapping it up

Remember that nothing changes if you remain a member of SURF until the day you retire.

If you transfer to a new retirement fund after 1 March 2021, the contributions and growth in the new fund (your non-vested rights) will be treated differently. This also applies if you joined SURF after 1 March 2021.

Finally, if your non-vested rights are less than R247 500, you can take the entire amount as a cash lump sum (after tax).

If you need some guidance on your journey towards a comfortable retirement, get in touch with a SURF retirement benefits counsellor, who will help educate and empower you to choose the direction that is best for you.

Any questions?

If you need help understanding any of the content described in this document, please contact the retirement benefits counsellor for more information. There is no charge for this service, and you will not be sold any Sygnia products. Remember, financial advice cannot be replaced by retirement benefits counselling. Ask your employer to facilitate a retirement benefits counselling session or send an email to surf@srf.sygnia.co.za or call 010 595 0574.

Accessing information on your mobile has never been easier

SURF’s USSD service allows you to view the latest value of your retirement savings and/or request a callback from the retirement benefits counsellor. To use this service, simply dial *120*794642# (*120*SYGNIA#) and complete the two-factor authentication process. You will be able to access real time information at your fingertips, even if you do not have a smartphone or access to a computer.