Major changes can be expected to retirement funds over the next few years, according to Chris Bösenberg, Sanlam's chief consultant on group benefits.
Future trends include:
* A move away from the multiple choice of funds, currently based on pension or provident funds, to single funds because of proposals to get rid of the different tax structures;
* More members taking their benefits as a monthly pension rather than a lump-sum because of proposed tax incentives;
* Limited benefits for the higher paid because of proposed higher rates of tax with 45 percent being paid on benefits exceeding R800 000 (taken as a lump -sum) or R1 130 000 (used to pay a monthly pension) as well as the 17 percent tax on the interest and rental income of a fund;
* Unapproved funds for lower and higher paid. It would be more tax efficient for high income executives to contribute to an unapproved fund when benefits exceed a certain level while lower paid workers, who did not pay tax, could find they were taxed on their benefits. Bösenberg expected unapproved group investment funds, to which members would make after tax contributions but would not be taxed on fund income or on the end benefit, to become more popular. The assets would also be available for life crises.
* Greater investment choices for members;
* Reduced personal risk cover (death and disability) because of the increase in costs, particularly as a result of Aids;
* Better termination benefits when a member leaves a fund before retirement (for example, resignation or retrenchment). Bösenberg said it was indefensible that a member did not receive the full accrued benefit on leaving. The cost would need to be quantified;
* Greater subsidies paid to pensioners to cover medical aid to meet changes in the medical industry which will move away from the cross subsidisation of younger, healthier members of older members; and
* A move towards retaining assets on death with a gradual pay-out to beneficiaries rather than a lump-sum to avoid having to make a decision immediately when "a loved one dies".
