Welcome to our first edition of X-press for 2020. This month we focus on the areas of relevance to Medical Schemes and Retirement Fund Benefits from the Budget speech, delivered by the Finance Minister on 26 February 2020.
We do, however, need to share some information on the (COVID-19) Coronavirus before we tackle the budget speech.
COVID-19 Coronavirus Outbreak
As you are all aware, the pandemic, (COVID-19) Coronavirus is a crisis, unlike any other in recent times. While it is important to keep abreast with developments, we encourage you to seek information and guidance from reputable sources and engage in responsible sharing.
Verified information channels:
World Health Organisation: https://www.who.int/emergencies/diseases/novel-coronavirus-2019
Department of Health South Africa: http://www.health.gov.za/index.php/outbreaks/145-corona-virus-outbreak/465-corona-virus-outbreak
Department of Health South Africa WhatsApp line: text ‘hi’ to +27 60 012 3456
National Institute for Communicable Diseases: http://www.nicd.ac.za/
Medical Scheme Coverage:
Most South African medical schemes have issued communication around the cover available for (COVID-19) Coronavirus, providing cover, for confirmed cases, in line with guidelines set by the World Health Organisation and National Institute for Communicable Diseases.
Please contact your medical scheme for information or to confirm your benefits.
Retirement Fund reform
Tucked away in the budget document was a section stating that Government and the National Economic Development and Labour Council had agreed to proceed with Retirement Reform related to the harmonisation of all retirement benefits, including Provident Funds. The implementation date was scheduled for March 2021. Although this change has been postponed on several occasions, it now appears there is consensus amongst the key stakeholders, and a greater determination to implement next year in March.
Lump-sum retirement pay-outs and deductions
There have been no changes to the retirement fund lump-sum or severance benefits, as well as the retirement fund withdrawal benefits.
The retirement fund deductions for Provident, Pension and Retirement annuity funds remains the same at 27,5% of the greater of remuneration or taxable income to the maximum of R350k per year.
Tax- free savings Account
The annual cap on contributions to tax- free savings accounts has increased from R33 000 to R36 000 from 1 March 2020, with the limit remaining at R500 000.
This remains unchanged at 20% on dividends paid by resident and non-resident companies of shares listed on the JSE.
Unclaimed monies in Retirement Funds and the Guardians Fund are being considered for Infrastructure development.
Legislation to centralise unclaimed benefits funds and establish a central registry of all members of retirement funds will be introduced.
National Treasury is concerned that members of Retirement Annuity and Preservation funds emigrate to withdraw their fund benefits and to break tax residency. As a result, the South African Reserve bank exchange control process will no longer apply. It is proposed the resulting amendments will be in effect from 1 March 2021.
Medical tax credits
The monthly tax credits were increased by 2,8%, with the member and the first dependent increasing from R310 to R319 per month, and thereafter R215 for all other dependents.
There was no change from 2018 to 2019 and a lower than inflation increase this year, which is in line with the government approach, as the less than inflation increases are designed to fund the roll-out of National Health insurance.
We hope you find this summary useful and encourage you to practice the recommended safety measures to protect yourself, family and others against the spread of (COVID-19) Coronavirus.