I just did a significant RA top-up for a client – this is money that will be invested in SA funds and will stay in South Africa (apart from the 25% offshore allocation) and that will one day be used to provide an income which will once again be largely spent in the SA economy.
Crazily, as of next year, the contribution (for tax relief) on retirement funds will be capped at R350000! I know that the average person will not reach this cap but for those that will, this means that the balance of the money (that would have been invested in SA) will be invested elsewhere and most probably offshore. Anecdotal evidence is that money is once again leaving SA at an incredible rate…(official figures are hard to access).
Why on earth (apart from trying to please the masses where Government is seen not to be favouring the wealthy) would anyone put a cap on RA contributions? We need people to save and we need money in the SA economy…if I cant use my RA (because it no longer makes tax sense) I am going to take my money offshore. Surely we need to keep the funds in the SA economy? Surely the cap is a very bad idea?
Is anyone at treasury thinking about this?
