Guiding consumers since 2009

Saving for retirement should remain top priority

By Staff Writer

Professionals, such as doctors, engineers, accountants and lawyers, as well as other higher earning white collar workers need to continue to provide for their own retirement savings needs, but should closely monitor the proposed retirement industry reforms, outlined by the Minister of Finance in the 2011 Budget Speech.

That is the view of Gerhard Joubert, Head of Group Marketing at PPS, who says that it is clear from the Minister’s speech thatreforms will be implemented on a gradual basis. Joubert says, however, that as these reforms unfold, it is crucial for professionals to stay abreast of the changes, as these could have serious financial ramifications for them.

For example, the introduction of the R200 000 cap from next year on the amount deductible from tax for retirement savings will negatively affect retirement fund members who earn more than R888,888 per annum.

According to Nick Battersby, CEO of PPS Investments, over that level, the individual is effectively driven away from the products governed by the Pension Funds Act towards other discretionary products, which are often unregulated. “South African consumers already have inadequate replacement ratios at retirement and this disincentive will likely exacerbate this.”

He adds that for most employees, life and disability cover is offered though group cover in employee schemes, which in turn is linked to contribution rates. These contribution rates will be lowered under this new principle.

“We have always encouraged members to start saving sooner and benefit from longer period of capital growth. It has always been difficult to catch up later in your career because contribution rates need to become much higher to make up for years of lost contributions and growth from a young age. This change will make it even more difficult to catch up, if not impossible. Older senior employees (presumably the high earners) will be forced to prolong their careers which will limit opportunities for the younger generations, which in turn is no supportive of an employment-friendly strategy.”

Saving for retirement is crucial and speaking to a retirement consultant is the best place to get started.

Recent Articles

Featured Everything you should know about tax auto assessment

In 2019, the South African Revenue Service (SARS) launched a system, which was dubbed an “auto assessment”, to assist taxpayers with their annual tax returns. But what does this system entail, and how will it impact you?

What does it mean to be a registered Financial Services Provider?

You may have noticed that financial institutions state that they’re registered Financial Services Providers (FSP). But what does this actually mean, and how does this benefit you as a consumer?

Should the retirement age change?

Across the world, people are retiring later than they used to. However, retirement products are centred around set retirement ages at which point you’d be able to access your retirement savings. But how applicable is the current retirement age in South Africa?

Everything you need to know about wills

Death can leave a lot of confusion and chaos. What happens to your possessions when you die can have a profound effect on those you leave behind. But you can soften the impact by drawing up a will.

Deals

Get 30% off your gym membership with Absa student account

Price: Available on request
When: Daily
Where: Nationwide

Get 10% discount on Rentalcars.com

Price: Available on request
When: Daily
Where: Worldwide

Get up to R5 back in rewards points when buying fuel

Price: Available on request
When: Daily
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions