The first‚ Incentivising non-retirement savings, sets out proposals for a non-retirement savings product which is supported by tax incentives. The aim‚ according to Treasury‚ is to support voluntary savings by households and complement retirement savings.
"Household savings play an important role in the economic policy agenda of government. Higher levels of discretionary household savings help to reduce the financial vulnerability of households‚ especially those in the low and middle income segments‚" Treasury said.
It added that higher levels of savings can strengthen the resilience of households to unexpected declines in income‚ enabling them to smooth their expenditures.
It plans to do this through tax-free returns‚ growth and withdrawals and limiting contributions to R30‚000 per year and R500‚000 over the lifetime of an individual. It said that these limits may be adjusted from time to time to take inflation into account.
The other paper‚ Improving tax incentives for retirement savings‚ proposes to simplify the current tax regime by harmonising the tax treatment of contributions to retirement funds.
"The current regime is complex‚ results in increased administrative costs and is open to abuse through excessive contributions by employers and high-income individuals‚" Treasury said.
It added that Cabinet noted‚ at its meeting of 19 September 2012‚ that the promotion of household savings and the reform of the retirement industry were aimed at assisting and incentivising South African households to save more‚ particularly for their retirement, and to better preserve and grow their pensions.
"Final proposals will only be made after the consultation processes are completed and will also consider how best to protect vested or accrued rights of current retirement fund members. These urgent interim retirement reform measures will complement the more fundamental and comprehensive social security reforms‚" Cabinet said at the time.
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