Government has thrown financially struggling workers a lifeline by allowing them to withdraw an increased amount of money from their pension funds as part of a broad retirement fund reform.
However, the government also increased the ceiling for contributions to the unemployment insurance fund (UIF) to shore up the fund that was nearly depleted by the impact of Covid-19.
Yesterday, the National Treasury yesterday gave effect to increase the de-minimus amount, or threshold, in relation to withdrawals for paid-up annuities.
The gazetting of the regulations follows an announcement in Chapter 4 of the 2021 Budget Review tabled by Finance Minister Tito Mboweni in February.
Draft Regulations were published for public comment on the National Treasury website in February. Taxpayers given more than 30 days to submit their written comments.
The Treasury said it received 91 written comments, and further changes were made to the final regulations following receipt and consideration.
This will see an increase in the de-minimus amount in relation to withdrawals from retirement savings for members with paid up annuities from R7 000 to R15 000.
“The change to the withdrawal threshold is intended to assist households in accessing funds,” Treasury said in a statement.
Meanwhile, the Treasury said the ceiling for the UIF contribution would increase from R14 872 to R17 712 a month.
“The revised UIF contribution ceiling will align with the benefit threshold and provide additional funds to the UIF after a large portion of the available funds have been used for the Temporary Employment Relief Scheme,” the Treasury said.
The ceiling for contributions to the UIF has not been increased in the past four years, despite the increase in the benefit ceiling.
The UIF benefit provision in the past year has assisted 13.9 million workers.
The Treasury said the continued relief for employees who retained jobs and higher salaries was no longer appropriate, thus the ceiling returned to be in line with the benefit ceiling from June 1.
PwC head of national tax technical Kyle Mandy said the changes, especially the UIF ceiling, would not make a significant difference in household savings.
“The de-minimus amount increase means an increase in the amount allowed to be withdrawn in fully paid annuities, there’s nothing more to it,” Mandy said.
“As for the UIF, this is simply an increase in the maximum tax contribution to bring it in line with the benefit ceiling. This just means more money going to the pot of the UIF. It’s a tax increase if you like.”