Chapter 6: Personal Investment in South Africa

Question 1

The incentives for individuals are:

Answer 1

• Contributions are granted tax relief at the investor’s marginal tax rate
• Taxable investment income and capital gains within the fund are taxed at a preferred rate. (In the 2007 budget this was set back to zero.)
• Part of the fund may be taken as a tax-free lump sum on retirement.
• Life insurance can be provided from contributions to the fund. The death benefits are used to enhance the amounts received by the dependants of a deceased member.

Question 2

The withdrawing pension fund member can decide to:

Answer 2

• Leave the money in the pension fund (f the pension fund provides for “paid up” membership).
• Transfer the reserves to a new pension fund.
• Transfer the withdrawal benefit to a preservation account.