There were two conferences in Johannesburg this week of importance to all retirement fund members - one was the Institute of Retirement Funds (IRF) annual convention and the other was the first annual investment convention of the Association of Unit Trusts.
Both conferences dealt in different ways with the continuing void on what the government plans to do about retirement funding and more particularly on retirement tax.
It has now been three years since Michael Katz recommended substantial changes to the structure of retirement funds through tax changes.
The proposed changes have already seen many people making decisions, some bad, on such issues such as early retirement, based on the expectation of the early implementation of the Katz proposals.
In a nutshell the Katz recommendations will get rid of the tax differentiation between the various type of funds, which currently fall into three categories of defined benefit pension funds, defined contribution pension funds, and defined contribution provident funds.
* With a defined benefit fund your employer guarantees you a pension. Your contributions are tax deductible and when you retire the benefits become taxable. You must take at least two thirds of the benefit as a monthly pension.
* With a defined contribution pension fund your employer does NOT guarantee you a pension but only that contributions will be made to the fund. Your contributions are tax deductible and when you retire the benefits become taxable. You must take at least two thirds of the benefit as a monthly pension.
* With a defined contribution provident fund your employer does NOT guarantee you a pension but only that contributions will be made to the fund. Your contributions are NOT tax deductible but you pay far less tax on your benefits when you retire. You can take all your money as a lump sum.
Michael Katz has recommended that all retirement funds be taxed in the same way. You will get a tax-free amount at retirement and then you will be encouraged to use a portion of your money to buy a monthly pension with further tax breaks.
At the Institute of Retirement Funds meeting, Jan Groenewald, the IRF president, took a swipe at the government for its continuing indecision about where it wants to take retirement funding.
While at the Unit Trust convention, Maria Ramos, the director general of the Department of Finance, indicated that it could take another year or so before the issue was completed.
The question for retirement fund members, particularly those nearing retirement is: do you take account of the Katz recommendations or not? The conventional approach is that in tax planning you deal with what is and not with what you suspect might happen.
This I believe is the approach you should continue to take.
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Another issue that came to the fore at the Unit Trust Convention was that unit trust companies and linked product investment companies have their beady eye on retirement funds. They have already quite successfully targeted the funds of people who have retired but now want a bigger stake in the build up of retirement savings.
What excites them in particular is the growing investment choice being given by many retirement funds. In other words you are offered an array of unit trust funds in which to invest retirement funds with the ability to switch between funds at will.
As I have written before this is a high-risk way of managing investments particularly as few advisers and even fewer individuals have the skills or the time to make these decisions on an on-going basis.
To me all this sounds like another case of forget about the interests of individuals so so long as the profits are great.
Fund trustees and members should be very careful about placing retirement money at risk.