South Africa Bows to Union Calls for Pension-Law Changesby
Legislation aims to standardize tax treatment of pension funds
Law sought to discourage workers from cashing in pensions
South Africa’s government bowed to labor union demands and agreed to postpone some of the changes to tax laws that seek to discourage workers from cashing in their pension funds when they resign or retire.
Parliament approved the Taxation Laws Amendment Bill in November and President Jacob Zuma signed off on it the following month, saying it should come into effect on March 1. The law is aimed at standardizing the tax treatment of all retirement funds and limiting tax-free withdrawals.
The government had been notified of union plans to strike against the implementation of the law and has undertaken to address their grievances, Jeff Radebe, a minister in the Presidency, told reporters in Cape Town on Thursday. The requirement for workers to buy an annuity when they cash in their pensions, known as annuitization, will be put off until March 2018, the National Treasury said in an e-mailed statement. Workers will not be required to annuitize contributions made before that date.
“The changes to the law will be tabled with Parliament within days,” Radebe said. Union “concerns have to be addressed urgently to ensure that when the law commences, the changes to the provident fund benefits will be implemented smoothly and efficiently,” he said.
Provisions of the law not related to annuitization will come into effect on March 1, the Treasury said.
The Congress of South African Trade Unions, the country’s largest labor group and a key ally of the ruling African National Congress, accused the government of trying to dictate to workers how they should spend their savings or pensions and called for a comprehensive social welfare policy to be developed before pension fund reform was undertaken.
“Suspending the implementation of the law does not mean that a deal has been done,” Sizwe Pamla, the federation’s spokesman, told Johannesburg-based broadcaster ENCA. “Cosatu will only say a deal has been reached once the law is withdrawn altogether.”