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Government is helping SA citizens save tax free

In last year’s budget minister of finance, Pravin Gordhan, announced – among others – a number of retirement and savings reforms that are set to come into effect in the coming years. One of these reforms is that government is planning to create an investment vehicle in which all returns earned and withdrawals made are tax free.

Says Chris Veegh, head of consulting at 10x Investments, initially you will only be able to contribute up to R30 000 to the account and it will have a lifetime limit of R500 000, which will increase with inflation. “It is expected that the new accounts will be introduced by 2015 and will co-exist with the current tax-free interest income dispensation, but this has yet to be confirmed,” says Veegh.

South Africa has an extremely poor savings culture: Henry van Deventer - head of business development at financial advisory company Acsis – says that last year the ratio of household debt to disposable income was 75.8%. Unless we change this ratio, millions of South Africans won’t be able to afford to retire because they haven’t saved enough. Scary stuff…

What’s the solution?

I’m not sure if you’ve heard the anecdote of the young girl who is presented with a marshmallow and is told that if she doesn’t eat the sweet for 20 minutes, she’ll be rewarded with two marshmallows? As we live in a society of instant gratification, the girl can’t stand the pressure of staring at the marshmallow and ends up eating it, not taking into consideration that if she waits just a little bit she’ll be rewarded with two.

We need to change this mindset.

Lia Marus is the editor of HR Pulse. She has a BA in French, Italian and Linguistics from UCT, an MA in translation from Wits and a Postgraduate Diploma in Management from the Wits Business School. She is currently studying towards her LLB through Unisa. Lia started her career off in corporate communications, where she worked as a sub-editor, researcher and marketing coordinator. She then heeded the call of the publishing world and went into the business-to-business publishing field. She worked as a sub-editor as well as a chief sub-editor. Before joining ITWeb, she managed an HR guidebook at a leading international publishing company.