South Africa: Budget flags pension, health, pay and finance initiatives

Connecticut Enacts Paid Family and Medical Leave

South Africa’s 2020 budget includes several initiatives concerning the conduct of financial institutions (including retirement funds); levies payable by the financial sector; initiatives to deal with unclaimed pension benefits, pension reforms, and the withdrawal of pension funds by emigrants; updates to the pay-as-you-earn (PAYE) system; the rollout of National Health Insurance; and increased medical tax credits. Highlights are provided below and Mercer Marsh Benefits has provided a more detailed  analysis

Highlights

  • The Conduct of Financial Institutions Bill (COFI). Proposals aim to streamline and replace the legislative framework for the conduct of financial institutions, which includes retirement funds. The government has announced that a revised bill will be published for comment and presented to parliament in 2020. 
  • Financial Sector Levies Bill. The treasury will present a bill to parliament during 2020 specifying the levies to cover the operating costs of the Prudential Regulation Authority, the Financial Sector Conduct Authority and the ombudsperson. Levies must be paid by occupational funds, retirement annuity funds, commercial umbrella funds, pension fund administrators and long-term insurers.
  • Unclaimed pension benefits. The government will publish proposals to centralize the handling of unclaimed pension benefits, including the establishment of a central registry for all retirement fund members. 
  • Retirement fund reform. The government will advance reforms to include the harmonization of all retirement benefits, including provident funds. The proposals likely will include the compulsory annuitization of two-thirds of provident fund payments upon retirement to prevent individuals from taking their entire benefit as a lump sum. Other reforms will address improved oversight and governance of commercial umbrella funds, fund consolidation and pension auto-enrollment.
  • Emigration of individuals and payment of retirement funds. The budget includes changes to current procedures that allow individuals who are emigrating to withdraw funds from their pension preservation fund, provident preservation fund and retirement annuity fund. 
  • Review of the PAYE system. PAYE processes and legislation will be updated to modernize and automate the process for employers.
  • Rollout of National Health Insurance (NHI). The treasury announced that a bill to introduce NHI will be considered by parliament — this could suggest that the NHI rollout will take place over a longer period of time than previously anticipated.
  • Medical tax credit increases. Monthly medical tax credits will increase to ZAR 319 from ZAR 310 for the primary and secondary beneficiary, and to ZAR 215 from ZAR 209 for other beneficiaries. 
  • Tax-free savings account contributions. An increase to the contribution limit — to ZAR 36,000, up from ZAR 33,000 — is proposed.

Related resources

Non-Mercer resource

Mercer Law & Policy resource

Other Mercer resource

Susana DaSilva
by Susana DaSilva

Assistant Vice President, Mercer Marsh Benefits

Fiona Webster
by Fiona Webster

Principal, Mercer’s Law & Policy Group

Stephanie Rosseau
by Stephanie Rosseau

Principal, Mercer’s Law & Policy Group

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