{"id":196456,"date":"2021-09-08T10:00:08","date_gmt":"2021-09-08T08:00:08","guid":{"rendered":"https:\/\/wereldwyd.co.za\/victory-for-taxpayers-as-state-controlled-pension-fund-proposal-is-withdrawn\/"},"modified":"2021-09-08T10:00:08","modified_gmt":"2021-09-08T08:00:08","slug":"victory-for-taxpayers-as-state-controlled-pension-fund-proposal-is-withdrawn","status":"publish","type":"post","link":"https:\/\/wereldwyd.co.za\/en\/victory-for-taxpayers-as-state-controlled-pension-fund-proposal-is-withdrawn\/","title":{"rendered":"Victory for taxpayers as state-controlled pension fund proposal is withdrawn"},"content":{"rendered":"

by Amanda Visser<\/em><\/p>\n

The sudden withdrawal of the controversial Green Paper on Comprehensive Social Security and Retirement Reform (state pension) is typical ANC tactics, says Magnus Heystek, director of Brenthurst Wealth Management.<\/p>\n

It is good at sending up smoke signals from ANC related people or institutions to see what the response to their proposal is. \u201cOnce they see the reaction they adjust the strategy,\u201d he says.<\/p><\/blockquote>\n

Social Development Minister Lindiwe Zulu withdrew the green paper after a massive pushback by taxpayers and several other stakeholders, without offering any reasons.<\/p>\n

The green paper proposed a contribution of between 8% and 12% to a state-controlled pension fund. This would have been deducted from employees\u2019 remuneration. Another tax of 10 percentage points would have been levied to increase the basic income grant.<\/p>\n

Dirk Hermann, CEO of Solidarity, says the green paper was \u201cabsurd, irrational, unworkable and unconstitutional\u201d. The withdrawal is a victory for taxpayers who pushed back.<\/p>\n

Solidarity earlier embarked on legal action against the minister and gave her 30 days to withdraw the document since due process was not followed.<\/p>\n

\u201cSolidarity will continue with its resistance and legal action against the green paper should it resurface in another form at a later stage,\u201d warns Hermann.<\/p>\n

Rotten to the core<\/strong><\/p>\n

Heystek says these \u201csmoke signals\u201d, similar to the land reform changes, create a lot of uncertainty. The industry is going to battle to convince people to invest their savings in retirement products.<\/p>\n

\u201cPeople will argue that they are not prepared to save a cent into a fund in which they may be locked into for a long time over which they do not have any control.\u201d<\/p>\n

Hermann says the green paper was rotten to the core.\u00a0 \u201cIt is deeply concerning that such an irrational green paper is published as part of the legislative process.\u00a0 It creates policy uncertainty amongst employees, businesses and investors,\u201d he says.<\/p>\n

Keith Engel, CEO of the South African Institute of Taxation, says that the withdrawal comes as a great relief. Workers and businesses are simply at their breaking point, regardless of the cause.\u00a0 A 10-12% tax increase may place many individuals over the 50% marginal rate line.<\/p>\n

Growing mistrust<\/strong><\/p>\n

Business would eventually be pushed to raise wages to cover the difference. There is a growing mistrust of pensions given all the regulatory tightening adopted and proposed.\u00a0 \u201cMany are now questioning whether they should invest in pensions at all. This is despite the tax advantages for retirement savings out of fear that government policy hounds are increasingly looking at the size of these funds as a source of government revenue.\u00a0 Proposals like these do not help,\u201d says Engel.<\/p>\n

Heystek says such a state-controlled fund will work in countries like Norway, Sweden, Finland and Denmark. These countries are significantly richer per capita than SA, they have very low levels of unemployment, have great respect for law and order and considers it almost unthinkable to break any rules. \u201cEveryone contributes and everyone benefits from it. There is no tolerance for fraud or theft.\u201d<\/p>\n

Heystek says in SA almost every state-owned entity, government fund and municipality is bankrupt. \u201cThere is no example where a government-controlled fund is being managed well.\u00a0 Even the Public Investment Corporation, which administers the Government Employment Pension Fund, is shrouded in obscurity.\u201d<\/p>\n

He says given the current circumstances in the country the retirement industry is the last thing that government should be messing with. It should rather focus on economic growth and job creation.<\/p>\n

A good place to start is to get rid of the minimum wage which has led to more unemployment, depriving people of the opportunity to become part of the economy.<\/p>\n

Reconsider financial situation<\/strong><\/p>\n

Heystek says if a state-controlled pension fund is ever introduced in SA, there is a real danger that the shadow economy (underground economy or cheating economy), where people operate entirely outside the tax and regulatory system or they do not correctly report their tax obligations, will grow.<\/p>\n

According to Heystek around 60% of the contributions for insurance is for retirement savings.\u00a0 The retirement savings industry has always been a pocket of excellence in the economy.<\/p>\n

\u201cIt is a massive industry, and it is highly regarded. It is one of the biggest local industries offering employment to more than 200 000 people.\u201d<\/p>\n

He suggests that people take a closer look at their own financial circumstances. People should invest where they have total control over their asset allocation. If there is additional money left they should build up a foreign nest egg to limit their exposure to SA and its unique problems. \u201cMany people are asset rich and cash poor. They have several properties but the returns on those investments have been very poor.\u201d<\/p>\n

Heystek says it may be time to get rid of it because things are not going to get better.<\/p>\n

ALSO READ: <\/strong>Huge uncertainty around taxation of retirement savings on emigration.<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

by Amanda Visser The sudden withdrawal of the controversial Green Paper on Comprehensive Social Security and Retirement Reform (state pension)…<\/p>\n","protected":false},"author":162,"featured_media":175988,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[801,800],"tags":[1130,1013,302],"class_list":["post-196456","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-and-migration-news","category-news","tag-emigration","tag-retirement","tag-tax"],"taxonomy_info":{"category":[{"value":801,"label":"FINANCIAL AND MIGRATION NEWS"},{"value":800,"label":"News"}],"post_tag":[{"value":1130,"label":"emigration"},{"value":1013,"label":"retirement"},{"value":302,"label":"tax"}]},"featured_image_src_large":["https:\/\/wereldwyd.co.za\/wp-content\/uploads\/2024\/10\/retired-couple-beach-chairs-in-page.jpg",778,518,false],"author_info":{"display_name":"Amanda Visser","author_link":"https:\/\/wereldwyd.co.za\/en\/author\/amandavisser\/"},"comment_info":0,"category_info":[{"term_id":801,"name":"FINANCIAL AND MIGRATION NEWS","slug":"financial-and-migration-news","term_group":0,"term_taxonomy_id":801,"taxonomy":"category","description":"","parent":800,"count":200,"filter":"raw","term_order":"0","cat_ID":801,"category_count":200,"category_description":"","cat_name":"FINANCIAL AND MIGRATION NEWS","category_nicename":"financial-and-migration-news","category_parent":800},{"term_id":800,"name":"News","slug":"news","term_group":0,"term_taxonomy_id":800,"taxonomy":"category","description":"","parent":0,"count":494,"filter":"raw","term_order":"0","cat_ID":800,"category_count":494,"category_description":"","cat_name":"News","category_nicename":"news","category_parent":0}],"tag_info":[{"term_id":1130,"name":"emigration","slug":"emigration","term_group":0,"term_taxonomy_id":1130,"taxonomy":"post_tag","description":"","parent":0,"count":41,"filter":"raw","term_order":"0"},{"term_id":1013,"name":"retirement","slug":"retirement","term_group":0,"term_taxonomy_id":1013,"taxonomy":"post_tag","description":"","parent":0,"count":1,"filter":"raw","term_order":"0"},{"term_id":302,"name":"tax","slug":"tax","term_group":0,"term_taxonomy_id":302,"taxonomy":"post_tag","description":"","parent":0,"count":3,"filter":"raw","term_order":"0"}],"jetpack_featured_media_url":"https:\/\/wereldwyd.co.za\/wp-content\/uploads\/2024\/10\/retired-couple-beach-chairs-in-page.jpg","fimg_url":"https:\/\/wereldwyd.co.za\/wp-content\/uploads\/2024\/10\/retired-couple-beach-chairs-in-page.jpg","_links":{"self":[{"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/posts\/196456","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/users\/162"}],"replies":[{"embeddable":true,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/comments?post=196456"}],"version-history":[{"count":0,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/posts\/196456\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/media\/175988"}],"wp:attachment":[{"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/media?parent=196456"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/categories?post=196456"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wereldwyd.co.za\/en\/wp-json\/wp\/v2\/tags?post=196456"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}