So, you are in a company pension or provident fund; therefore, your pension and financial security in retirement are sorted, right?

One of the sad facts of the South African experience is that approximately only 6% of all South Africans have a retirement benefit equivalent to their salary just prior to retirement. Most do not have enough retirement capital saved. This alarming statistic has not improved over the past 20 years despite the industry’s intense efforts to educate and advise retirement fund members.

The big danger of apathy and complacency is that you do not critically assess your financial journey through life on a regular (annual) basis, and you drift towards retirement without knowing your exact circumstances or whether you will have enough for retirement.

Once you take into account the increase in medical aid costs and longevity, the retirement picture can become quite challenging.

All is not lost, a critical assessment of your current financial position and the introduction of a committed plan of action to improve it will lead to a better retirement outcome.

The good news

Over the past year, there have been several positive major events which have happened in South Africa, namely:

1. The general election on 29 May and the forming of the Government of National Unity.
2. The introduction of the Two Pot retirement system on 1 September.
3. The overall reduction in the price of petrol and diesel.
4. The general increase in investment returns.
5. The reduction in interest rates by 0.5% (0.25% on 20 September and 0.25% on 21 November).
6. The reduction in the inflation rate to 2.8% year-on-year in October.

All these have had a positive effect on the economy, and most are beneficial to consumers, as they present an opportunity to make additional savings for retirement.

Reducing your retirement outcome

Many South African households are struggling financially due to increasing prices and the cost of living and have taken the opportunity to access part of their retirement savings through the Two Pot legislation changes. Almost two million fund members have withdrawn R35 billion from their funds to date, and SARS has collected approximately R5 billion in additional tax from this.

While this has been a great advantage for many to reduce their debt, it does mean that two million of the members in formal retirement funds have reduced their retirement outcomes. While some of the amounts have been small, if they have many years to go to retirement, the long-term effect can be dramatic. Of concern is the probability that some members will continue to take withdrawals from their savings portion on an ongoing basis, thus reducing their retirement outcome even further.

Some employers also allow members to adjust the retirement component of their annual salary package by increasing or reducing their retirement contributions on an annual basis. There is always the temptation to reduce this during times of financial stress to increase their take-home pay and not increase it again when their situation improves.

Additional savings opportunity

The reduction in interest rates has provided relief on the servicing of debt, such as housing and vehicle financing loans and credit card debt, resulting in lower payments.

It is a wonderful opportunity to put that monthly saving into additional voluntary contributions to your retirement fund and gain tax relief on these additional contributions.

Many people receive bonuses in December, and they should consider utilising part of this to save for their retirement and receive tax relief on the contributions.

Small steps like these can become very powerful if implemented regularly.

Most funds have a member portal on their website or through the fund’s WhatsApp account. These portals have powerful financial tools to assist fund members in assessing their retirement outcomes on an ongoing basis.

For example, the additional voluntary contribution calculation shows the effect of contributing an additional monthly amount. This is often the catalyst to motivate members to save more.

End Goal

Reaching retirement is not the end goal, it is just the start of the next phase of your life, your retirement journey. Take action today to ensure that you receive the retirement outcome that you want and deserve.

While the country is abuzz with the new two-pot system legislation, which came into effect on 1 September 2024, members are still pondering the pros and cons of the new legislation. The two-pot system aims to preserve two-thirds of members’ future contributions for retirement and in the event of a member changing employment. The legislation now also allows members to partially access their retirement savings should they encounter emergency financial situations while they are still employed. The flexibility in accessing some of the retirement money while working could assist in leveraging debts, but it would also reduce members’ future retirement savings.

Growing your retirement savings with the help of compound interest

Retirement planning is a long-term commitment, and the earlier you start saving, the better the impact of compound interest will be. Compound interest is defined as interest that is paid both on the original amount of money saved and on the interest that has been added to it. Simply referred to “interest earned on interest”. This means that over time, members’ investment savings can grow at an accelerating rate when invested.

Let’s look at an example to explain the concept:

A member invests an amount of R1,000 for a period of three years and earns 5% interest per year (assuming that all other factors are constant).

In year one, the return would be R50, which would start to compound in the following year. After the first year, the member would have made R1,050. By adding the same 5% interest in the second year, the member would get a R52.50 return, and the total amount would be R1,102.50. In the third year, the total growth would be R1,157.63 (R1,102.50 x 5%). The extra returns over and above the initial R50 interest gained are relatively small initially, but they grow steadily as time goes on. This concept is guaranteed to work in a long-term investment despite volatile markets, provided that the member refrains from withdrawing their money before their retirement date.

Accessing part of the retirement money now or annually is at an opportunity cost of earning more returns for the future. To illustrate this opportunity cost, most fund administrators have built two pot calculators showing members their potential loss of growth over time and explaining the present cost of withdrawing part of their retirement savings.

Below are factors that will enhance the concept of compound interest to work in your favour:

• A return rate that beats the inflation rate – These factors may be out of members’ control as they are dealt with more within the fund’s Investment Policy Statements (IPS) by the trustees of the funds. The risk factors can be mitigated with proper investment strategies and investment advice.
• Preserved retirement savings and continuous contributions – Keeping your money invested and ensuring monthly contributions will harness the effect of compound interest.
• Time horizon – This is a crucial factor; some members may start saving earlier than others, but investing longer allows the money in the fund to grow over time, enhancing the final amount available at retirement.

Our daily lives are evidence enough that we are living in a rapidly changing world, with instant gratification and consumption impacting us daily. The current generation is predicted to have longer life spans due to advanced technologies, wider access to wellness programs, and improved medical inventions. With such environmental effects, we are bound to develop cognitive and mental behavioural biases that influence our decision-making regarding investing.

It is imperative to have a retirement planning strategy (with constant review measures) in place. Members are to ensure that they get guidance from accredited financial planners when creating their plans, and it’s also critical to acquire benefit counselling when changing employment or at any life-changing event.

Making your money work for you

Apart from “eating into your future” money today and not allowing compound interest to work its magic, there are other disadvantages to consider when withdrawing your retirement savings before retiring, which include the taxation cost (marginal tax rate charged at withdrawal) and transactional administration costs.

Here are some ways members can improve their future retirement savings:

• Additional Voluntary Contributions (AVC) – Contributing extra to your retirement savings is a no-brainer; however, members struggle to either start or keep such contributions continuous due to affordability. The best trick is to align your AVC with your salary increment date or use a portion of your bonus incentive as a once-off AVC. Not only will you increase your retirement value but there is a tax deductibility benefit when putting extra into your retirement funds.
• Avoid withdrawing from the saving pot – Members should investigate utilising constructive budgeting tools to cater for monthly expenditures and creating emergency funds outside of their retirement vehicle (e.g. Bank Savings Account) for liquidity in times of need.

As per Albert Eistein’s infamous quote, “Compound interest is the eighth wonder of the world. He who understands it earns it …he who doesn’t … pays it.” Keep in mind that the key is to grow as much wealth now and retire comfortably later.

The private healthcare industry is abuzz as medical schemes announce their benefit changes and premium increases for the upcoming year.

The Council for Medical Schemes (CMS) issued a guideline for schemes to limit their premium increases for 2025 to 4.4%, plus “reasonable utilisation estimates”. However, market trend indicates that medical scheme increases will continue to be influenced by medical inflation, resulting in substantially higher than Consumer Price Index (CPI) increases.
During this period, members are allowed to change their plan options for the upcoming year. With the current South African economic climate and increasing living expenses, it is understandable why affordability remains one of the important factors members consider when selecting a plan option.

South African medical scheme members need to be savvy in their approach when choosing an option and utilising their benefits. It is important to balance affordability with appropriate benefits, which requires members to stay informed about benefits.

In this article, we outline risk-funded benefits that are available to members to gain access to appropriate healthcare and optimise utilisation.

Understanding Risk-funded Medical Scheme Benefits:

Prescribed Minimum Benefits (PMB)

This benefit covers a defined basket of care for treatment defined as emergency medical conditions and a list of 271 medical conditions. It ensures that qualifying medical scheme members have access to specified healthcare services, regardless of the benefit option they have selected.
Certain qualifying treatments may require the utilisation of a healthcare provider contracted to the scheme, commonly referred to as a Designated Service Provider (DSP), to qualify for full cover through this benefit.

Chronic Illness Benefit

The Chronic Illness Benefit covers members for a defined list of 26 chronic conditions. You need to apply to have your medicine and treatment covered for your chronic condition. The cover through this benefit is subject to limits, medication formularies and a defined basket of care.

Oncology

The medical scheme requires confirmation of the cancer diagnosis from the treating oncologist. Utilisation of a DSP may be a requirement for accessing this benefit, depending on plan choice. Plan choice may also dictate the level of care, as cover varies in overall limits to PMB level, and can extend cover to include biological drugs and innovative treatment.

Preventative Care

The purpose of this benefit is to encourage medical scheme members to go for their health checks, as early detection of certain conditions can lead to prevention and/or positive treatment outcomes. However, the basket of tests covered tends to vary from one scheme to the other. Some of the common tests or screenings include glucose, blood pressure, cholesterol and HIV tests. These screenings are subject to utilising a DSP. Some additional vaccines and tests that are usually age-band related, such as Flu, HPV and childhood vaccinations, mammograms and prostate screenings, can also be accessed through this benefit.

Maternity Benefit

This benefit is plan-dependent; the medical scheme specifies the basket of care, which may include pre and postnatal consultations, scans, and pathology tests. Members are encouraged to contact their medical scheme upon confirmation of pregnancy to register and activate access to these benefits.

Additional Benefits

The below are subject to plan choice and medical scheme benefits:

• Emergency Room consultation – this is generally limited to a specified number of casualty visits; qualifying criteria may be age and event-specific.
• GP Consultations – additional in-person/virtual GP consultations once a member’s day-to-day benefit is exhausted, subject to consulting with a contracted DSP; this may vary based on scheme and plan choice.
• Women’s Health – contraceptives, bone density scans.

Managed Care Benefits

This may vary from one medical scheme to the other, have definitive clinical qualifying criteria, and the application is subject to approval.

• Back and Neck Management Programme
• Mental Health Programme
• Post-Hospitalisation Programme

Should a member feel aggrieved by a funding decision made by the scheme, they may lodge a dispute or complaint with the medical scheme.

Ex-gratia

The scheme will review medical expenses not covered through available benefits or scheme rules, together with the case facts submitted through this application process.

A decision will be made on a case-by-case basis, where the scheme believes there are exceptional circumstances which warrant funding. This is not a medical scheme benefit, but it is classified as a discretionary fund where decisions by the scheme are final and cannot be disputed or appealed.

Take time to understand your benefits.

An authorisation or approval of a benefit does not guarantee that claims will be paid in full. Benefits may have limits, sub-limits, co-payments, require the use of DSP, and be subject to clinical entry criteria.

We acknowledge that scheme benefits and application processes may seem complex and challenging to navigate. Healthcare intermediaries serve as an excellent resource to facilitate and guide members through any hurdles they may encounter. For members, the benefit of taking the time to understand their cover better can save them from unexpected expenses.

When in doubt about a benefit, it is always best to contact your healthcare intermediary or scheme directly.

As we near 1 September 2024, we are examining the readiness for the new legislation, known as the two-pot system, which will impact members of retirement funds. This system presents both opportunities and challenges, as it allows for flexibility in accessing funds for immediate financial needs while also ensuring funds are preserved for retirement.

Here are some points to consider when withdrawing:

• Firstly, assess your financial needs, and determine the amount you need to withdraw and how it fits into your overall financial plan. Consider the impact on your long-term savings retirement plan.
• Consider tax implications: Understand how withdrawals will be taxed. Your savings pot withdrawal will be subjected to your marginal income tax rate, and SARS will levy penalty interest (IT88) on any tax arrears.
• Evaluate fees: Check for any transactional fees associated with withdrawing from the savings pot. Different administrators may have different rules regarding withdrawal fees.

To read more on the two-pot system and withdrawals, click here.

In this month’s edition, we shift the focus to cybersecurity awareness as the majority of the administrators will allow members to process their withdrawals online under the two-pot system, indicating a significant shift towards digitisation in the retirement fund management system. This modern approach within the industry will offer convenience and efficiency.

Since most of the online systems will be self-service, administrators have aimed to create user-friendly platforms; however, it is important to attend educational campaigns or engage with communications to understand how to access and navigate these tools.

Cybersecurity measures are a priority, as it is paramount to protect your data against breaches, fraud, and unauthorised access, given the sensitive nature of financial and personal data.

A proactive approach to security when protecting your personal information is a combination of vigilance, good practices, and utilising available tools.

Tips you can take to safeguard your personal information:

1. Secure Your Device: Use a strong passcode, biometric authentication (fingerprint or facial recognition), or both to lock your phone. – Enable automatic locking after a short period of inactivity.
2. Secure Personal Information: Keep sensitive documents in a safe place. Shred documents that contain personal information before discarding them.
3. Use Strong, Unique Passwords: Use complex passwords that include a mix of letters, numbers, and symbols. – Avoid using the same password across profiles and devices. Consider using a password manager to store and generate secure passwords.
4. Update Software Regularly: Keep your phone’s operating system and apps up to date to protect against vulnerabilities. Regularly back up data; you may use cloud services or other secure methods to back up important data in case of device loss or damage.
5. Use Secure Connections: Avoid accessing sensitive systems over public Wi-Fi. Use a VPN to secure your connection if necessary. Use cell phone data for secure transactions instead of public Wi-Fi.
6. Enable Two-Factor Authentication (2FA): If available, enable 2FA on accounts related to the system to add an extra layer of security.
7. Be Cautious of Phishing Attempts: Be wary of emails, texts, or calls requesting sensitive information. Verify the sender’s identity before responding. Avoid clicking on links or downloading attachments from unknown sources. Limit the amount of personal information you share on social media.
8. Monitor Financial Statements: Regularly review bank and credit card statements for any unauthorised transactions. Set up alerts for suspicious activity on your accounts.
9. Use Trusted Apps: Download apps only from official app stores (Google Play Store, Apple App Store). Check app permissions and only grant necessary ones.
10. Monitor App Permissions: Regularly review the permissions granted to apps and revoke any that are unnecessary for their function.
11. Use Security Software: Consider installing a reputable security app to protect against malware and phishing.

Remember to monitor for suspicious activities continuously. Staying alert for potential scams and seeking professional financial advice is crucial for making informed decisions that align with your financial goals and prevent you from falling prey to scams.

Tips sourced from www.experian.com.

As we reflect back on 2024, it’s difficult to comprehend where the time has gone. It reminds me of an elderly gentleman I once encountered at a Retirement Workshop who aptly said, “Life is like an hourglass—the sand seems to flow faster as it runs out.”

Looking back on the year, we can identify several significant events for South Africa.

7th National Election

The first is that South Africa celebrated another successful democratic, free and fair, election. The ANC lost its majority vote, with the newly formed MK Party making a powerful statement, with the support of nearly 50% of the KwaZulu-Natal voters and 15% nationally.

Tense weeks followed, as the political parties robustly negotiated the way forward for the country. Investor sentiment was negative, and money continued to flow from the bond markets. Following the negotiations, the political parties agreed to form a Government of National Unity (GNU), with ministerial representation for all the parties forming the GNU. Global investors have responded positively, with money once again flowing back into the country and the All-Share Index reaching record highs. There will no doubt be significant challenges going forward but we once again remain confident that the coalition government will act in the best interests of all South Africans.

National Health Insurance

The second significant event was that the National Health Insurance (NHI) bill was signed into law on 15 May 2024. The objective of the NHI is to introduce quality healthcare access for all South Africans and eradicate the current inequalities that exist in the country. The signing of the bill into law was not well received by many stakeholders, despite the concerns raised during extensive public engagements, the President still signed the bill into law without significant change. Initially, there is no impact as medical benefits remain in their current form. Industry commentary following the passing of the NHI bill into law is that the actual introduction of NHI is still at least ten years away. It is anticipated the Act in its current form will be legally challenged by many stakeholders as they believe there has been insufficient focus on critical areas, such as funding, human resource reallocation, current public sector healthcare corruption and the rollout process for the implementation of NHI. The status quo remains until further dialogue and communication is forthcoming from the healthcare industry.

Two-Pot (Component) System

The third significant event was the signing into law of the two-pot legislation, (I will refer to the pot, although the legislation refers to component) after several postponements. The effective date is 1 September 2024. Although there has been extensive previous communication from Chartered Employee Benefits, Fund administrators and the media, there still appears to be some confusion about who is affected by the two-pot system, so I will attempt to clarify some of these misconceptions below:

• The new system applies to the build-up phase of retirement, namely those members contributing to their retirement funds. It does not apply to pensioners; however, if a pensioner is contributing to a Retirement Annuity, it will apply.
• Members who are “55 years or older” on 1 March 2021 and have remained a member of the same Provident Fund will automatically be excluded from the two-pot system. These members can choose to opt into the two-pot system. They have until 1 September 2025 to decide if they wish to opt in, and thereafter, they can no longer opt-in.
• The two-pot system applies to both defined benefit and defined contribution funds. It also applies to pension, provident, preservation, and retirement annuity (RA) funds. It does not apply to beneficiary funds and unclaimed benefit funds.
• “Legacy” or “old generation” RA funds can be exempted. The legacy RAs are contracts held by an RA fund entered before 1 September 2024 that include a pre-universal life or universal life component. These funds can apply to the FSCA for an exemption from the two-pot system.
• Deferred pensioners will only have two pots in a fund (these are people who resigned and opted to leave their money in the fund until retirement). These members will have a vested pot and a savings pot. They will not have a retirement pot, because they are no longer making contributions. Their savings pot will consist entirely of the seed capital.
• Members are permitted one withdrawal per tax year, not per calendar year.
• A member not withdrawing from the savings pot, will not forfeit access to the amount they could have drawn in subsequent years.
• A member belonging to more than one fund, e.g., an RA and an occupational fund, can withdraw from each savings pot as long as the minimum value exceeds R2000.
• Withdrawals from the savings pot, while in service, are taxed at the member’s marginal rate of tax.
• Funds were required to submit rule amendments to the FSCA by 15 July 2024. If the rule amendments have not been approved by 1 September 2024, members will be unable to withdraw from the savings pot.

As we move forward into the second half of 2024, the retirement fund industry is buzzing. Fund administrators and service providers are hard at work making changes to systems and processes.

Consultants are engaging with members to educate them on the two-pot system to help members understand the implications and impact of withdrawing money from their savings pot prior to retirement.

We watch with interest the progress of the Government of National Unity and the challenges anticipated with the rollout of the NHI.

As tax season approaches, we reshare important information on preparing for the tax season.

The dates for the 2024 filing season are:

• Auto-assessment notices: 1 July 2024 to 14 July 2024
• Individual taxpayers (non-provisional): 15 July 2024 to 21 October 2024

Minister of Finance, Mr Enoch Godongwana, during his Budget Speech on 21 February 2024, confirmed that the Medical Scheme Fees Tax Credit (MTC) will remain for this tax year. The tax year commenced on 1 March 2024, and the monthly rebates for medical scheme contributions are as follows:

• Taxpayer: R364
• First dependant: R364
• Every subsequent dependant: R246

It is important to understand how this rebate works; it is non-refundable and used to reduce a person’s normal tax. Remember that an employer is obligated to adjust the monthly PAYE deductions by the medical tax credit, and therefore, employees would have already received the medical tax credit during the year if the medical scheme premium is deducted via payroll. Additionally, it follows that these tax credits are thus applicable to taxpayers only.

We encourage South African taxpayers to prepare their relevant financial and supporting documentation to facilitate a smooth filing process. With this in mind, it is important to take note of the following dates:

• The deadline (closing date) for non-provisional taxpayers is 23 November 2024.
• Taxpayers who file online have until 24 October 2024 to submit their return.
• Employers are required to issue employee tax certificates (IRP5/IT3(a)) by 31May 2024.
• Medical Scheme Tax Certificates are usually available from the last week of May and will be shared by your medical scheme. If you have not received your certificate, please contact your medical scheme provider or healthcare intermediary for assistance.

Understanding additional claimable expenses for medical scheme members

The Additional Medical Expenses Tax Credit (AMTC) is a non-refundable rebate and is used to reduce the normal tax a person pays, similar to the MTC. This rebate is calculated against the qualifying out-of-pocket medical expenses that an individual who belongs to a South African registered medical scheme incurred. If you submit all your medical expenses to your medical aid, this amount is normally reflected on the tax certificate from the medical aid as ‘claims not paid’, and you will not need to calculate this yourself when submitting your taxes. Here is a list of qualifying medical expenses:

• Services rendered and medicines supplied by any duly registered medical practitioner, dentist, optometrist, homoeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopaedist.
• Hospitalisation in a registered hospital or nursing home.
• Home nursing by a registered nurse, midwife or nursing assistant, including services supplied by any nursing agency.
• Medicines prescribed by any duly registered medical practitioner and acquired from any duly registered pharmacist.
• Expenditure incurred outside South Africa in respect of services rendered or medicines supplied which are substantially similar to the services and medicines listed above.
• Any expenses prescribed by the Commissioner and incurred because of any physical impairment or disability.

The calculation of the AMTC rebate is fairly complex; it is based on the individual’s taxable income, and there are qualifying categories such as insured persons 65 years and older, insured persons/spouses or children with a disability or persons under 65 with no disability. Please click on this link, or you can access the details of the calculation at www.sars.gov.za.

Paying medical scheme contributions for third parties

When a taxpayer is paying scheme contributions from their personal bank account for a spouse or parents who are not on the same membership, they can include this as part of their SARS return. If SARS requests proof, a medical aid contribution certificate from the medical scheme will be required with proof of payment, as well as a letter indicating the reason you’re making payment where you’re not the main member and whether the spouse or parents are financially dependent on you.

Medical Insurance

This type of insurance is not registered as a medical scheme in South Africa and does not qualify for the above medical tax and additional medical tax credits.

It is advisable to seek out professional tax advice from a registered tax practitioner when filing your returns.

In today’s fast-paced world, getting caught up in short-term financial goals, such as paying off debt or saving for a big purchase is easy. However, have you thought about your long-term financial security? Financial experts emphasise and recommend the importance of planning for retirement and beyond to ensure a comfortable future for yourself and your loved ones.

Here are some of the essential components for your long-term financial planning:

• Start saving and determine how much you require: Financial experts recommend that you aim to save at least 70-80% of your pre-retirement income to maintain your standard of living in retirement.
• Get your finances in order: Take stock of your assets, debt, and investments and evaluate if you are on track. Make a list of your income, expenses, debts, and savings to get a clearer picture of your financial situation.
• Maximise your retirement accounts: Align all your retirement portfolios and savings with your goals. Consider contributing to a tax-free savings account or a retirement annuity to maximise savings.
• Plan for healthcare costs: As you plan for retirement, it’s essential to consider the potential healthcare costs that may arise. Medical expenses can be unexpected and costly, and without adequate cover, they can quickly deplete your savings. To protect your hard-earned retirement funds, explore options for healthcare cover, such as:
  • Medical Aid: A medical aid scheme provides comprehensive cover for medical expenses, including hospital stays, doctor visits, and chronic medication. Research and compare different medical aid options to find one that suits your needs and budget.
  • Medical Insurance: Medical insurance provides cover for specific medical expenses, such as hospital stays or surgeries. It may not be as comprehensive as medical aid, but it can still provide valuable protection for your savings.
  • Gap Cover: Gap cover provides additional protection for unexpected medical expenses that your medical aid may not fully cover.
  When exploring healthcare cover options, consider factors such as premium costs, cover levels, network providers, pre-existing condition coverage and waiting periods.
• Create a lasting legacy: Establish a Will, Living Will, and Power of Attorney for peace of mind. A Will ensures that your assets are distributed according to your wishes, while a Living Will and Power of Attorney ensure that your healthcare and financial decisions are made by someone you trust.
• Choose the right retirement product: Consider your legacy goals and select a suitable option. For example, if you want to leave a legacy for your children, consider investing in a retirement product that provides a guaranteed income for life.
• Seek expert guidance: A financial adviser can help you navigate the complexities of retirement planning, so please engage an expert to get invaluable guidance to ensure your financial security and legacy.
• Start Early: The power of compound interest can work in your favour if you start saving and investing early. The earlier you start planning for retirement, the more time your money has to grow.
• Be consistent: Make saving and investing a regular habit to ensure that you reach your goals. Set up a monthly debit order or automatic transfer from your salary to make saving easier and less prone to being neglected.
• Diversify: Spread your investments across different asset classes to minimise risk and maximise returns. This can help you ride out market fluctuations and ensure that your portfolio grows steadily over time.
• Review and adjust: Regularly review your financial plan and adjust as needed to ensure that you are on track to meet your goals. This may involve rebalancing your portfolio, increasing your savings amount or adjusting your investment mix.
• Consider inflation: Inflation can erode the purchasing power of your money over time, so consider investing in assets that historically perform well during periods of inflation.
• Do not forget about estate planning: In addition to planning for retirement, consider how you want to distribute your assets after you pass away. This may involve setting up a trust, creating a Will or designating beneficiaries for your retirement accounts.

By taking control of your financial future and seeking expert advice, you can build a secure legacy and enjoy a stress-free retirement. Remember, retirement planning is a long-term process and every small step counts.

The NHI bill becomes an Act.

President Cyril Ramaphosa signed the NHI Bill into law on 15 May 2024, making the Bill an Act. In theory, it is somewhat of a milestone in the progress of the National Health Insurance; however, practically, several challenges remain before South Africa reaches a point of quality healthcare access for all.

The President stated, ‘At its essence, the NHI is a commitment to eradicate the stark inequalities that have long determined who receives adequate healthcare and who suffers from neglect.’

There has been uproar, as stakeholders in the healthcare industry are alarmed that the President, despite extensive public engagement, signed the NHI bill into law without significant change.

What does this mean for medical schemes and members?

The short version is that your benefits will not be impacted for a while and will continue in their current form.

Of particular importance is Section 33 of the Act, which sets out that once NHI is fully implemented, medical schemes will only be able to offer services that are not covered by NHI. Many industry experts believe that the version of a ‘fully implemented’ NHI is at least a decade away, with the government estimating ten to fifteen years as a likely timeline.

One consistent comment is that NHI will be implemented in stages. So, for now, and in the near future medical schemes will continue to operate in the manner which we are familiar with, perhaps with the introduction of Low-Cost Benefit Options (LCBOs).

What’s next?

The comments from President Ramaphosa’s speech at the signing of the NHI Bill speak to a more harmonised journey toward universal coverage:

“NHI recognises the respective strengths and capabilities of the public and private health care systems. It aims to ensure that they complement and reinforce each other. Through more effective collaboration between the public and private sectors, we can ensure that the whole is greater than the sum of its parts.”

In contrast, while medical schemes continue to lobby for a collaborative approach to universal health coverage, the Act in its current form alludes to affecting the continuity of medical schemes once NHI is ‘fully implemented’.

The Act in its current form will likely be faced with many legal challenges, further compounded by the legal reforms required to align existing legislation with the NHI framework. Critical areas such as funding mechanisms, human resource reallocation, infrastructure, and implementation processes require clarity.

In essence, the signing into law of the NHI Bill can be viewed as a commitment to universal healthcare coverage rather than implementation being an overnight event. We will continue to update you on the progress of the development of NHI.

In the 2011 film The Grey, Liam Neeson portrays a wolf hunter who attempts to lead seven oil workers through the Alaska wilderness after their plane crashed. He leads them through the heavy snow as they are chased and attacked by relentless wolves. The film, at its heart, is about the human will to survive and what keeps us alive.

It’s a dramatic comparison, but South Africa encountered our survival struggle in February 2023 when we were placed on the grey list.

The “grey list” issue in South Africa refers to the country’s inclusion on the Financial Action Task Force’s (FATF) list of jurisdictions with strategic deficiencies in their anti-money laundering and counter-financing of terrorism (AML/CFT) frameworks. Being on this list can have significant implications for a country’s financial reputation and access to global markets. South Africa’s placement on the grey list has prompted concerns about the effectiveness of its AML/CFT measures and the potential impact on its financial sector. It often requires affected countries to take immediate action to address the identified deficiencies and enhance their regulatory frameworks to comply with international standards.

To get off the grey list, South Africa must take several measures to address the deficiencies identified by the Financial Action Task Force (FATF) in its anti-money laundering and counter-financing of terrorism (AML/CFT) framework. Some of these measures include:

1. Strengthening Legislation: South Africa may need to enact or amend existing laws to enhance its legal framework for combating money laundering and terrorist financing. This could involve updating regulations, increasing penalties for violations, and improving mechanisms for enforcement.
2. Enhancing Regulatory Frameworks: The country must bolster its regulatory bodies responsible for overseeing financial institutions and ensuring compliance with AML/CFT measures. This may involve providing additional resources, training, and guidance to regulatory authorities to improve their effectiveness.
3. Improving Financial Intelligence Capabilities: South Africa needs to enhance its capacity to gather, analyse, and share financial intelligence related to money laundering and terrorist financing activities. This may involve strengthening collaboration between law enforcement agencies, financial institutions, and other relevant stakeholders.
4. Implementing Risk-Based Approach: Adopting a risk-based approach to AML/CFT measures allows South Africa to prioritise resources and efforts in areas with the highest risk of illicit financial activities. This involves conducting risk assessments, implementing appropriate mitigation measures, and regularly reviewing and updating risk profiles.
5. Enhancing International Cooperation: South Africa must strengthen its cooperation with other countries and international organisations to combat cross-border money laundering and terrorist financing activities effectively. This may involve improving information-sharing mechanisms, extradition treaties, and mutual legal assistance agreements.

The February 2024 FATF Plenary adopted a report by the Joint Group, which confirms that five of the twenty-two required Action Items are now addressed or largely addressed. These relate to the legal provisions criminalising terrorist financing and underpinning South Africa’s targeted financial sanction regimes related to terrorism financing and proliferation financing, increasing the use of financial intelligence from the Financial Intelligence Centre to support money laundering investigations, and increasing the resources of AML/CFT supervisors.

In a recent media statement release, the National Treasury stated that while South Africa is on track to address all the outstanding action items, it remains a challenge to address all seventeen of the remaining action items by February 2025. All relevant agencies and authorities will need to continue to demonstrate significant improvements. Additionally, these improvements must be sustained.

Let’s hope that South Africa achieves a better outcome than Liam Neeson and his fellow survivors experienced in the film and that we don’t end up at the mercy of the wolves.

Minister of Finance, Mr Enoch Godongwana, during his Budget Speech on 21 February 2024, confirmed that the Medical Scheme Fees Tax Credit (MTC) will remain for this tax year. The tax year commenced on 1 March 2024, and the monthly rebates for medical scheme contributions are as follows:

• Taxpayer: R364
• First dependant: R364
• Every subsequent dependant: R246

It is important to understand how this rebate works; it is non-refundable and is used to reduce the normal tax a person pays. Remember that an employer is obligated to adjust the monthly PAYE deductions by the medical tax credit, and therefore, employees would have already received the medical tax credit during the year if the medical scheme premium is deducted via payroll. Additionally, it follows that these tax credits are thus applicable to taxpayers only.

We always encourage South African taxpayers to prepare their relevant financial and supporting documentation well in advance to facilitate a smooth filing process. With this in mind, it is important to take note of the following dates:

• The deadline (closing date) for non-provisional taxpayers is 23 November 2024
• Taxpayers who file online have until 24 October 2024 to submit their return
• Employers are required to issue employee tax certificates (IRP5/IT3(a)) by 31May 2024
• Medical Scheme Tax Certificates are usually available from the last week of May

Understanding additional claimable expenses for Medical Scheme Members

The Additional Medical Expenses Tax Credit (AMTC) is a non-refundable rebate and is used to reduce the normal tax a person pays, similar to the MTC. This rebate is calculated against the qualifying out-of-pocket medical expenses that an individual who belongs to a South African registered medical scheme incurred. If you submit all your medical expenses to your medical aid, this amount is normally reflected on the tax certificate from the Medical Aid as ‘claims not paid’, and you will not need to calculate this yourself when submitting your taxes. Here is a list of qualifying medical expenses:

• Services rendered and medicines supplied by any duly registered medical practitioner, dentist, optometrist, homoeopath, naturopath, osteopath, herbalist, physiotherapist, chiropractor or orthopaedist.
• Hospitalisation in a registered hospital or nursing home.
• Home nursing by a registered nurse, midwife or nursing assistant, including services supplied by any nursing agency.
• Medicines prescribed by any duly registered medical practitioner and acquired from any duly registered pharmacist.
• Expenditure incurred outside South Africa in respect of services rendered or medicines supplied which are substantially similar to the services and medicines listed above.
• Any expenses prescribed by the Commissioner and incurred because of any physical impairment or disability.

The calculation of the AMTC rebate is fairly complex; it is based on the individual’s taxable income, and there are qualifying categories such as insured persons 65 years and older, insured persons/spouse or child with a disability or persons under 65 with no disability. Please click on this link, or you can access the details of the calculation on www.sars.gov.za.

Paying Medical Scheme Contributions for 3rd parties.

When a taxpayer is paying scheme contributions from their personal bank account for a spouse or parents who are not on the same membership, they can include this as part of their SARS return. If SARS requests proof, a Medical Aid contribution certificate from the medical scheme will be required with proof of payment, as well as a letter indicating the reason you’re making payment where you’re not the main member and whether the spouse or parents are financially dependent on you.

Medical Insurance

This is a type of insurance which is not registered as a medical scheme in South Africa and does not qualify for the above medical tax and additional medical tax credits.

It is advisable to seek out professional tax advice from a registered tax practitioner when filing your returns.