The tax changes signed into law on Wednesday are intended to encourage workers to preserve their retirement savings. One of the most important changes according to the National Treasury is that all individual taxpayers who contribute towards a pension fund‚ provident fund or retirement annuity will in future qualify for a tax deduction of up to 27.5% on their taxable income‚ up to a limit of R350‚000.“Except for very high-income taxpayers who tended to claim a higher than proportionate deduction‚ this limit will‚ in most cases‚ afford members of pension funds to save more through a retirement fund‚” Treasury said recently.The changes will also allow one-third of the retirement savings to be cashed out as a lump sum‚ with the remaining two-thirds to be annuitised. This law already applies to all pension fund and retirement annuity fund members‚ but will now be extended to members of provident funds.“Hence‚ all new contributions into provident funds after 1 March 2016 by those younger than 55 years will be subject to the two-thirds annuitisation requirement‚ but only once the amount at retirement exceeds the de minimis threshold. It will take several years before many provident fund members under the age of 55 years reach this higher limit‚” Treasury explained recently.It added that pension and provident funds would remain under control and management of boards’ trustees‚ and that the government “cannot touch those funds”.“Government has no intentions of introducing preservation ‘through the back door’. The law has not changed to prevent members of provident and pension funds from accessing their retirement savings upon resignations‚ including also upon dismissals or retrenchments‚” Treasury stated. It added that it had increased the tax deduction on retirement contributions to encourage and not force workers to save.“Government remains committed to releasing the social security paper despite its complexity. Even with the advent of social security‚ retirement funds will still need to be improved to ensure that the outcome for members is better than at present.“Government is currently working on various reforms to lower charges on annuities and assist members with accessing suitable annuities to deal with their various concerns.”The Treasury advised workers in the current difficult economic environment which made employment difficult and retrenchments likely not to cash in their retirement funds as they would face a higher risk of not being re-employed.“Government cautions workers against any rumours or false information that indicates that workers will not be able to access any of their retirement money when they change jobs.“Another false rumour is that Government wants to takeover or nationalise pension and provident funds. The fact that provident fund members whose retirement savings exceed R247‚500 will be required to annuitise two-thirds of their saving does not mean that these savings are lost to retirees or members.“Instead‚ the annuitisation requirement simply means that those affected workers will have to use their retirement savings slowly in retirement by receiving a regular income rather than a cash-lump sum‚” Treasury explained. “Government advises workers not to rush and resign from their jobs if they have any concerns‚ and should rather check with their retirement funds (with their trustees or principal officers) or registered financial advisors to assess any information on whether it is correct or not.“Those cashing out their pension or provident fund savings will not only pay significant amounts of unnecessary taxation‚ but will lose out the growth on their savings and will need to save significantly more in future years if they wish to safeguard their standard of living in retirement‚” Treasury warned last month.-You can also find a full Q&A on the Treasury's website...