LEGISLATIVE UPDATES

Revenue Laws Amendment Bill 2016

ON THE SCALES 7 of 2016

Revenue Laws Amendment Bill 2016

On 24 February 2016, Minister Pravin Gordhan presented his National Budget speech. The Minister also announced the release of the Revenue Laws Amendment Bill of 2016 (‘the Bill”).

The Bill provides for the postponement of some of the tax changes contained in the Taxation Laws Amendment Act of 2015 and clarifies certain technical issues. One of the technical corrections relates to the calculation of the amount to be included in taxable income in respect of deductible contributions to defined benefit retirement funds.

Annuitisation in provident funds

The annuitisation of retirement benefits paid by provident funds is postponed for two years, to 1 March 2018.

Contributions made by or on behalf of provident fund members to their provident funds before 1 March 2018 will not require annuitisation.

Tax free transfers between approved funds

The Bill provides for the postponement of a tax free transfer from a pension fund to a provident fund to 1 March 2018.

Comment: All pending transfers from pension funds to provident funds need to be reviewed urgently and possibly withdrawn to avoid any tax liability for members.

Protection of vested benefits on transfers from provident funds to pension funds

The definition of pension fund was amended to include the protection of vested rights when transferring from provident funds to pension funds after 1 March 2018.

Comment: Concerns had been raised that where a member of a provident fund transferred to a pension fund, the vested portion (that is the contributions to the provident fund that could still be taken as a lump sum on retirement) would no longer be protected and annuitisation would apply to that vested portion.

Annuities paid from provident and provident preservation funds

The Bill provides for the postponement of the inclusion of the compulsory annuity paid by a provident fund or a provident preservation fund from the definition of the term ‘compulsory annuity’ in the Income Tax Act, to 1 March 2018.

Technical correction- valuing of fringe benefit employer contributions to defined benefit funds

The Bill includes a correction of the value of the fringe benefit for employer contributions to defined benefit retirement funds that must be deemed to be the employee contribution. It makes provision for the value of the fringe benefit deemed as the employee contribution to be equal to the cash equivalent of the value of the benefit calculated under paragraph 12D of the Seventh Schedule to the Income Tax Act, 1962 even if such value is greater than the actual contribution paid by the employer.

A further publication will be issued as the Bill progresses to an Act. We will be carefully reviewing the wording and consequences of the Bill. We shall keep you informed as to the implications of the Bill. In addition, we may see further clarifications coming out in the Taxation Laws Amendment Bill 2016, which will be released later this year for comment.

If you need more information, please contact your consultant.

On the Scales is produced by Alexander Forbes Legal Services department to provide clients with information on employee benefits. The issues need to be carefully considered taking into account the specific circumstances of each of our clients.

February 2016

DB CURRENT MEMBERS

What does the Unilever Pensions team do?

The Team process all payments relating to resignations, retirements, transfers and death and disability benefits.  On request one-on-one sessions are facilitated with those who need clarification on their individual pension options. The team regularly visit the various Unilever sites, where important matters are communicated to the members.

What are the responsibilities of the Trustees?

Section 7A of the Pension Funds Act makes it compulsory for all funds to appoint trustees (Boards of Management) to manage the affairs of the fund. The group is made up of company-appointed, member-appointed and independent trustees. The trustees meet on a quarterly basis. The Trustees are responsible for the governance of the Fund and must ensure that the rules of the Fund are applied at all times.

What is the role of Alexander Forbes?

Alexander Forbes plays a record keeping role for the Fund, provides actuarial services and pays Unilever pensioners on instruction from the Fund for which they are reimbursed.  No member money is held by Alexander Forbes.

Who invests my Pension Fund Money?

The Fund money is invested in the Fund’s name and the Pension Investment Committee (PIC) is responsible for investment strategy. The PIC reports to the Trustees. Willis Towers Watson are the Fund’s investment consultants who advise the PIC on investment strategy.  The PIC appoints specialist investment managers who make the investment selections for the Fund.  The investments remain invested in the Fund’s name.

Who administers the Unilever SA Pension Fund?

The Fund is internally administered by a team of Unilever employees in the Pensions Department at the La Lucia Ridge Head Office. Some of the administrative functions are performed by Alexander Forbes using Alexander Forbes’ systems.