IRF DAILY - Tuesday, 23 October 2012

IRF DAILY
Tuesday, 23 October 2012
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IN THIS ISSUE:
LOCAL NEWS .................................................................................................................. 3
Investing in Africa ...................................................................................................................................................... 6
Court interdict fails - ex-wife loses share of pension ................................................................................................... 8
Living annuities oversold – research ......................................................................................................................... 11
INTERNATIONAL NEWS ............................................................................................... 13
Pensions lifeboat weathers downturn in the industry .............................................................................................. 13
Women save £800 less each year for their retirement than men ............................................................................... 15
UK pension funds may rank fund managers on activism ........................................................................................... 16
OUT OF INTEREST NEWS ..............................................................................................17
What to do after you’ve submitted your tax return .................................................................................................. 17
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LOCAL NEWS
Pension target isn’t a promise
This article was first published in the third-quarter 2012 edition of Personal Finance magazine.
So you expect to retire from your defined contribution (DC) occupational retirement fund with a pension of
75 percent of your final pensionable pay cheque? The reason is this is what your fund’s trustees have, in
your fund’s investment policy statement (IPS), told you they are aiming to give you.
At retirement, you decide you want to purchase a guaranteed pension that will escalate every year in line
with inflation so that the buying power of your pension will remain constant. Then, at or shortly before
retirement, you find out that your accumulated retirement funds will buy you a pension equal to only 60
percent of your final pay cheque.
So what went wrong and who is to blame?
The first thing you may do is to check regulation 28 of the Pension Funds Act. In your fund’s IPS, repeated
mention is made of regulation 28, which sets down how, and the rules according to which, your fund’s
trustees should invest your retirement savings in a prudential manner. For “prudential”, you understand
that your trustees should not take undue risks with your retirement savings. In other words, your trustees
should not be investing in some hare-brained scheme dreamt up by a lunatic employer.
You discover that regulation 28 has:
* Rules about how much may be invested in any particular asset class, such as a maximum of 75 percent in
equities (shares of companies); and then there are limits on how much can be invested in the shares of any
one company. And to keep a lunatic employer at bay, no more than five percent of your fund’s assets may
be invested in your employer’s company.
* A set of principles (since 2011), which, in effect, are a set of instructions to your trustees on how they
should invest and protect your savings.
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Among other things, the rules state that your trustees must “ensure that the fund’s assets are appropriate
for its liabilities”.
The assets are what you have saved, and the fund’s liability is the pension you want to achieve. So, in your
case, the fund’s targeted liability is sufficient money after 40 years of membership to purchase a pension
equal to 75 percent of your final pensionable salary that will increase in line with inflation.
John Anderson, Alexander Forbes’s managing director: research and product development, says
reasonable member expectations and trustee responsibilities in meeting those expectations are
highlighted in other legislation and in Financial Services Board (FSB) notes. As with the principles in
regulation 28, he says, many of these are broadly worded. For example, one FSB guidance note (PF130)
states that boards of trustees are expected to identify the varying expectations and interests of current
fund members and pensioners, and to ensure that those expectations are met and/or managed, if
appropriate.
Anderson says the “expectations and interests of current members and pensioners” can vary widely. In
most funds, this objective will relate to saving appropriately for retirement. Despite their shortcomings,
Anderson says, the replacement ratio (RR) objectives in an IPS are a useful way of capturing trustee
responsibilities and member expectations, “although, in reality, they will be changing over time as
conditions, member demographics and needs change”. The RR is the percentage of your final pay cheque
that you can expect to receive as a monthly pension.
He also points out that the preamble to regulation 28 states that trustees have a duty to use a “responsible
investment approach to deploying capital into markets that will earn adequate risk-adjusted returns
suitable for the fund’s specific member profile”.
Anderson says on the basis of all these admonitions to trustees, he believes that trustees have a duty to
ensure that their fund’s investment strategy is expected to earn adequate returns to meet your realistic
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expectations. It is not enough to base a fund’s investment strategy simply on historic investment market
returns and interest rates.
You speak to your fund’s trustees to find out what has gone so badly wrong with your RR.
Anderson says your trustees will probably have a list of justifiable reasons why you did not achieve an RR of
75 percent. These reasons could include:
* You have not been a member of your retirement fund for 40 years. The RR calculation in your fund’s IPS is
based on your belonging to the fund for 40 or 45 years, whereas you may have been a member for only 30
years.
* You received salary increases way above inflation over the 10 years before retirement. The consequence is
that the returns on your retirement savings have not kept pace with the increase in your pay. The result is
that your RR has reduced. To have kept your RR in line with your pay increases, you would have had to have
increased your contribution levels.
* Interest rates have fallen since your trustees calculated the RR of 75 percent. Guaranteed pensions are
based on long-term interest rates. In simple terms, a life assurance company takes the money with which
you buy a guaranteed pension and uses it mainly to purchase long-term bonds at a fixed rate of interest. In
effect, your money is lent to quality borrowers, such as governments, at fixed rates of interest over periods
that may be as long as 20 years. So, if you retire when interest rates are low, the prevailing long-term
interest rates will affect the level of your pension.
* The returns on your savings in your retirement fund were lower than anticipated because of the crash in
investment markets in 2008.
Let’s say you have been a fund member for the required period of time, and the RR of 60 percent is a
consequence of salary increases and changes in interest rates. You can then argue that your fund’s trustees
should have:
* Taken action to counter the effects of those changes; and/or
* Warned you that your expectations of an RR of 75 percent would not be met because of the changes.
Your trustees, in turn, may argue that:
* You are a member of a DC fund, where your pension is not guaranteed as it would be with a defined
benefit (DB) fund. All that was guaranteed was that your employer would contribute a percentage of your
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pay to your retirement savings. The trustees stated in your fund’s IPS that the RR of 75 percent was a target
– not a guarantee – and warned that you may have to save more. In other words, you should have taken
greater responsibility for your future.
* It would be impossible for your trustees at fund level and/or at individual member level to keep making
adjustments to things such as investment mandates and the contribution rate to ensure an RR of 75
percent. Full Report: https://mail.google.com/mail/?shva=1#inbox/13a8c633b79beaa6
Personal Finance
22 October 2012
By Bruce Cameron
Investing in Africa
This article was first published in the third-quarter 2012 edition of Personal Finance magazine.
Individual South African investors who want exposure to the good returns that are expected from African
equity and other markets still have relatively little choice of investments. Asset managers that have
launched African equity unit trust funds mostly offer these funds to institutional investors or the funds have
very high minimum investment amounts.
Momentum’s rand-denominated Africa Equity Fund is available to individuals through its linked-investment
services provider platform. The minimum investment is R100 000. Prescient’s rand-denominated Africa
Equity Fund is available to individual investors who have a minimum of R10 000 to invest.
Eric Kibe, manager of Sanlam’s Dublin-based African Frontier Markets Fund, which is available only to
institutional investors, says retail investment flows are more volatile during periods of instability. This may
unduly prejudice investment strategy and necessitate a shorter-term horizon than is optimal.
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Jonathan Kruger, manager of the Prescient Africa Equity Fund, says trading costs in African equity markets
are high, and although it may not be efficient to have money flowing in and out of the portfolio too
frequently, cash flows can help a fund manager to buy a share without necessarily selling another one to
finance it, and vice versa. This dynamic can in fact reduce portfolio turnover.
Humphrey Gathungu, who co-manages the rand-denominated Stanlib Africa Equity Fund, which is also
available only to institutional investors, says few African funds are available to retail investors because the
costs of running funds that invest in under-researched areas such as Africa are high.
Investec has a rand-denominated Africa Fund for institutional investors only, with a minimum investment of
R50 million.
Coronation’s Africa Frontiers Fund is a United States dollar-denominated fund listed on the Irish Stock
Exchange. The minimum investment amount is 100 000 euros. You may find offshore funds that invest in
Africa that are open to individual investors, but none of them is among the offshore funds that are
registered with the Financial Services Board (FSB) as funds suitable for local investors.
For example, Imara Asset Management, part of the Botswana-based Imara Group, has a number of African
funds: an African Opportunities Fund – with a 25-percent exposure to South Africa – a Nigeria Fund, a
Zimbabwe Fund, an East Africa Fund and an African Resources Fund. They are companies, and the African
Opportunities Fund is an open-ended investment listed on the Irish Stock Exchange. The minimum
investment amounts are high – US$100 000 for each fund or combined into more than one fund. Full
Report:
http://www.iol.co.za/business/personal-finance/financial-planning/investments/investing-in-africa-
1.1408078
Personal Finance
22 October 2012
By Laura du Preez
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Court interdict fails - ex-wife loses share of pension
Member spouse had exited the fund before granting of the divorce order
A pension fund does not have to pay a divorced spouse a share of the pension interest if there was no valid and
binding divorce order at the time of the member's exit from the fund, the Pension Funds Adjudicator has ruled.
Ms Muvhango Lukhaimane, acting Pension Funds Adjudicator, dismissed a complaint brought by Mrs
Williams of Cape Town.
Mrs Williams complained that Alexander Forbes Retirement Fund (first
respondent) had refused to pay her a portion of her former spouse's pension interest following their
divorce on 29 November 2010.
Mr Williams and the complainant were still contesting the divorce at the time when he left his employment.
The complainant's attorneys obtained an interdict in April 2010 preventing the payment of Mr Williams'
pension interest until the divorce was finalised. On 2 April 2011, the complainant was advised that the
divorce order, in terms of which she was allocated half of Mr Williams' pension interest, was unenforceable.
The first respondent paid Mr Williams his full withdrawal benefit upon his exit from the fund but refused to
pay the complainant half of Mr Williams' pension benefit in accordance with the divorce order.
Mrs Williams contended that she was assured that no payment would be made to Mr Williams until the
divorce process was finalised. She said she forwarded the final divorce order to Alexander Forbes Financial
Services (Pty) Ltd (second respondent) after the completion of the divorce proceedings.
However, the second respondent decided to pay a withdrawal benefit to Mr Williams. She was not paid her
share of the pension interest as stated in the final divorce order. Mr Williams also refused to pay her share
as ordered.
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In its response to the OPFA, the first respondent submitted that the final divorce order, which directed the
fund to pay half of Mr Williams' pension interest to the complainant, was obtained eight months after he
had left his employment. It stated that the divorce order was not binding on the fund as the member
spouse exited the fund before the divorce order was granted. This was based on the definition of "pension
interest" in the Divorce Act 70 of 1979.
The first respondent asserted that where the member spouse exited the fund prior to the date of
finalisation of the divorce, there could not be a resignation benefit payable as at the date of divorce.
It contended that in order for a divorce order to be valid and enforceable against the fund, there must be
an amount available to share. Mr Williams became entitled to receive a withdrawal benefit from the fund
upon his exit. His fund credit was zero as at the date of divorce, which was issued eight months after he
had exited the fund.
The first respondent referred to a determination in the matter of EskomPension and Provident Fund v
Krugel [2011] 3 BPLR 309 (SCA) where it was held, inter alia, that there could be no pension interest once
the pension benefit had accrued to a member spouse before the date of divorce.
The first respondent denied that the complainant was led to believe that payment would be made to her
upon the finalisation of the divorce proceedings. The first respondent advised Mrs Williams that shewas
still able to claim payment of her share of the pension benefit awarded from her former spouse in his
personal capacity.
In her determination, Ms Lukhaimane said Section 37A of the Pension Funds Act provided that pension
benefits and rights may not be transferred, ceded, reduced or subject to attachment. She said since the
enactment of the Divorce Amendment Act 7 of 1989, section 37A of the Act must, in the context of divorce
proceedings, be read together with section 7(7) and (8) of the Divorce Act.
The non-member spouse is entitled to a portion of the member spouse's notional benefit only if it qualifies
as pension interest as defined and it falls within the ambit of sections 7(7) and (8) of the Divorce Act read
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together section 37D(4) of the Act. She said Mr Williams withdrew from the fund in March 2010 and as a
result became entitled to receive his fund credit in terms of the fund rules.
The divorce order was only granted on 29 November 2010 after Mr Williams had already been paid his fund
credit.
Thus, there was no pension interest payable to the complainant as at the date of divorce. The final divorce
order that was issued on 29 November 2010 was not valid and enforceable against the first respondent as it
held no pension interest in respect of Mr Williams.
The definition of "pension interest' referred to a notional benefit that would have been payable to the
member spouse had his membership terminated at the date of divorce. This means that the member
spouse must still hold a pension interest in the fund as at the date of divorce. Once the pension benefit has
accrued to the member spouse before the date of divorce, the provisions of sections 7(7) and 7(8) of the
Divorce Act are no longer applicable.
Put simply, there is no pension interest for purposes of sections 7(7) and 7(8) of the Divorce Act and section
37D(4)(a) of the Act. Ms Lukhaimane said the fact that there was an interdict preventing the payment of
any benefit to Mr Williams did not detract from the fact that there was no valid and binding divorce order
as at the date of his exit from the fund.
"The first respondent was bound in terms of its rules to pay Mr Williams his full fund credit upon his
withdrawal. "Therefore, this Tribunal is satisfied that the first respondent did not act improperly or
unlawfully in refusing to pay the complainant any portion of the pension benefit paid to her former spouse.
"In the result, the complaint cannot be upheld and is dismissed," Ms Lukhaimane said.
Insurance Times & Investment News
19 October 2012
By Bashira Mansoor
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Living annuities oversold – research
NON-EXECUTIVE DIRECTOR CLAIMS IT IS THE BIGGEST MISS-SELLING OF FINANCIAL PRODUCTS.
CAPE TOWN - There is nothing lively about the debate between those who believe a living annuity is a
better pension option than a guaranteed annuity or vice versa. That is, until sparks flew briefly at the
presentation of research paper at the Actuarial Society conference in Cape Town this week.
The paper presented by Johann Swanepoel and Mayur Lodhia from Momentum Employee Benefits shows
that the majority of pensioners in good health expecting to live beyond the age of 80 are better off buying
an inflation linked guaranteed annuity than an investment linked living annuity.
This flies in the face of current trends. Statistics released by the Association for Savings and Investment SA
(Asisa) show that living annuities attracted around 85% of retirement assets last year.
It was only when a member of the audience – a non-executive director of one of SA’s biggest insurance
companies – stood up to say that in his opinion the selling of living annuities is the biggest miss-selling of
financial products in the history of the financial services industry that one realised that actuaries do get
heated. This is particularly in cases where they believe that the products being sold are detrimental to the
long-term financial health of pensioners and the financial services industry.
The debate between the two forms of pension insurance has waged for at least the last decade. This year
government weighed in with its discussion document on saving. Treasury is concerned about the long-term
consequences of pensioners making inappropriate investment decisions. It’s also worried that higher costs
incurred in living annuities are reducing pensions by 20%.
The commission structure on living annuities is viewed by some – such as the fuming man in the audience –
as a perverse incentive to sell retirees inappropriate products. The discussion is relevant to anyone with a
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pension plan or retirement annuity as they are required by law to invest two thirds of the payout on
retirement in either a living or guaranteed annuity.
In a nutshell living and guaranteed annuities are financial products that are offered by insurance companies
or linked product providers. Living annuities are investment-linked products that allow a pensioner to
withdraw an annual income of between 2.5% and 17.5% of their residual capital. They (along with their
broker) must manage the underlying investments and they must ensure that the investments will provide,
after costs, a return that will sustain the income flow until death.
At death any capital remaining belongs to the deceased estate.
A guaranteed annuity provides a retiree with an inflation-linked pension, but transfers investment
and longevity risk (the risk of outliving your retirement savings) to the insurer. The flexibility offered by a
living annuity makes it an attractive choice. However, Swanepoel and Lodhia’s paper challenges many of
the accepted norms about living annuities and raises concerns about the ability of living annuities to
provide an income for life.
The authors tackle the arguments used by living annuity pundits one by one. For instance buying a
guaranteed annuity risks wasting money if the pensioner dies before ‘using up’ the capital value of the
policy. That’s because any residual capital remains in a common ‘mortality pool’ that is used to fund annuity
holders who live longer than expected.
Swanepoel and Lodhia argue that the twin objectives of a living annuity – namely income in retirement and
a return for your beneficiaries at death – are conflicting objectives. "If you want to leave behind capital for
beneficiaries you will have to sacrifice a portion of your income to achieve this,” says Lodhia. “There are no
free lunches.”
By sticking to a product with one purpose – namely a guaranteed annuity – and enjoying the benefit of
insurance pooling, a member is guaranteed a minimum real income for life. If someone lives past 80 they
actually accrue more benefit than was initially invested. That’s because their income is funded from the
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pool. Statistically the odds of a person living beyond 80 are even. “It is amazing that people don’t factor in
the high probability of longevity,” says Swanepoel.
While the flexibility of a living annuity is lauded it has a downside too. The financial needs of a pensioner
may force them to increase their withdrawals to the point that the capital base is eroded.
This is increasingly the norm. The issue is the 2.5% to 17% cap on annual withdrawals, says Swanepoel. While
you can set your income level between these limits, it may not be sustainable if you set the limit too high,
make bad investments or live longer than the available capital allows.
“If you are drawing 17% annually you need to earn 17% on your investment, after fees, to maintain your
capital balance,” he says. This is a tall order and encourages risky investment behaviour as pensioners try to
generate higher returns.
The authors are not saying that guaranteed annuities are better in all cases. They simply argue that for
middle income pensioners in average to good health a guaranteed annuity can be a better option.
Of course, sadly, none of these products is a cure for not having saved enough.
Moneyweb
21 October 2012
International News
Pensions lifeboat weathers downturn in the industry
The health of UK pension funds may have deteriorated sharply over the past year but the scheme
responsible for bailing them out in the event of trouble has had an altogether better run of form.
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The Pension Protection Fund (PPF), which takes on defined benefit pension schemes of collapsed
companies in the UK, saw its funding position improve last year with surplus assets over liabilities widening
to £1.07bn. The surplus, which improved by £391m year-on-year, was driven by investment returns of £1.7bn,
helped by hedges against low interest rates.
The pensions lifeboat is also funded by the levy it charges businesses with final salary schemes. Last month,
the PPF said it has been forced to increase this by £80m to £630m with record low interest rates, falling gilt
yields and the Bank of England’s money printing programme hitting pension schemes across the country.
The collective deficit of the 6,432 schemes that qualify for PPF protection stood at £229.1bn at the end of
September. Alan Rubenstein, chief executive, said the scheme remained on course to be self sufficient by
2030 when it hopes to be supported by its investment and not need to impose a levy on UK businesses.
However, he admitted the economic downturn had hit the PPF since the surplus was recorded at the end of
March.
“Foremost in our minds has been the continuing global financial crisis and the adverse effect it has had on
the funding positions of UK pension schemes,” he said. “Increased claims on the PPF have already meant
that our own funding level has fallen from 106pc in March 2012 to about 102pc and that levies are likely to
rise in the short-term.”
The PPF said it now protects the retirement benefits of 360,000 people. It expects this figure to rise to
500,000 as more schemes transfer across.
The Telegraph News
22 October 2012
By Jamsie Dunkley
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Women save £800 less each year for their retirement than men
Women are saving almost £800 a year less than men to fund their retirement, exposing the growing gender
gap in pension saving, a new report shows.
According to Scottish Widows, women save an average of £766 a year less than men. This compares to a
gender gap of £700 just one year ago. The difference means that a 30-year-old woman who maintains the
current average rate of saving will face a pensions shortfall of £29,800 compared to a man if she retires at
65, Scottish Widows said.
Over a quarter of women are failing to put money aside for their old age, compared to a fifth of men, the
report found. Lynn Graves, head of business development of corporate pensions at Scottish Widows, said
that women find it more difficult to save for the long-term due to their roles as carers for children and the
fact that they are more likely to work part-time.
The company’s research found that women see their savings are “a pot to dip into to cover unexpected
costs” at any time rather than funds to be “ring-fenced” for their retirement, said Ms Graves.
“While women are right to focus on making sure their debts are manageable, other sacrifices may need to
be made to ensure retirement planning is in place,” she said. Gregg McClymont, the shadow pensions
minister, called on the Government to raise the threshold at which companies have to start automaticallyenrolling their staff into workplace pensions. Under current auto-enrollment rules – which came into effect
this month – anyone earning less than £8,105 a year will miss out on a pension.
Mr McClymont said that this threshold disproportionately affects women. He estimated that eight out of
ten people who will miss out on a pension because of this cut-off point will be female.
“The pension savings prospects of hundreds of thousands of low paid women are being sacrificed by the
Tory-led Government,” said Mr McClymont.
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The Telegraph News
22 October 2012
By James Hall
UK pension funds may rank fund managers on activism
* New framework to assess fund firms on governance standards
* Firms to be graded on their stewardship activities
LONDON, Oct 22 (Reuters) - Britain's pension funds are weighing up plans to rank fund managers based on
their efforts to improve performance at the companies they back, in the latest sign of institutional investors
flexing their muscles. Umbrella body The National Association of Pension Funds is leading a campaign to
develop a framework that would rate fund managers according to their work towards, for example,
improving governance at companies.
Pension funds own billions of pounds of assets which they outsource to fund managers, which manage
them on their behalf. The framework is based on the "2020 Stewardship" report by a group of six
institutional investors including some of Britain's largest pension schemes such as the Universities
Superannuation Scheme and Railpen.
Talks with the NAPF, whose members represent some 800 billion pounds ($1.3 trillion) in assets, revolve
around a matrix system, grading asset managers based on how much or how little they do on the
governance front.
Although details are still being worked out, the framework is likely to be publicly accessible online.
In the immediate aftermath of the financial crisis, pension funds were accused of not demanding greater
accountability - through their fund managers - from companies they invest in, especially banks.
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But recent high-profile shareholder challenges - dubbed the shareholder spring - and a raft of recent
measures aimed at improving governance standards such as the Stewardship Code and the Kay Report on
short termism in equity markets have signalled a shift in attitudes towards improved corporate governance.
"The basic idea behind this initiative is to help asset owners evaluate asset managers on different
dimensions of stewardship activity," said Simon Wong, a partner at activist investment firm Governance for
Owners.
"Often, asset managers describe their activities in broad terms and asset owners could benefit from such a
framework so that they are better equipped to then look how various asset managers are doing on things
ranging from voting, to engagement to policy."
At the moment, the only way pension funds can access what a fund manager is doing on corporate
governance is through information provided on individual fund manager websites.
A spokesman from the NAPF added: "We believe it is important that pension funds hold their managers to
account for their stewardship responsibilities and are looking at a number of ways in which we can assist
our members in that regard."
UK Reuters
22 October 2012
By Raji Menon
Out of Interest News
What to do after you’ve submitted your tax return
This article was first published in the third-quarter 2012 edition of Personal Finance magazine.
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Taxpayers often think that their responsibilities end once they have submitted their income tax return to
the South African Revenue Service (SARS). This is a big mistake and may result in your paying more of your
hard-earned cash to SARS than is required.
This article looks at the steps to follow once an income tax return has been filed with SARS, the options
available to taxpayers who are aggrieved by an income tax assessment issued by SARS, and how to pay any
outstanding income tax liability.
Understand your rights and obligations
You should be aware of your rights and obligations as a taxpayer once you have filed your income tax
return. Understanding this process and, in particular, the strict deadlines within which you must act will
enable you to make informed decisions – which ultimately may result in more cash in your pocket.
You have filed your tax return. What now?
Once you have submitted your income tax return to SARS, whether manually or using eFiling, it is important
that you regularly check the status of your income tax assessment, either via eFiling or telephonically with
SARS. It is important that you know when you have been issued with an assessment, because you need to
act on that assessment within strict prescribed deadlines.
Failure to act within the prescribed deadlines may result in your being unable to dispute your income tax
assessment with SARS (if you are dissatisfied with the assessment issued), or in penalties or interest being
levied if payment of any outstanding income tax liability is not settled within the prescribed deadlines set
by SARS.
The importance of checking your assessment
Once you have received your income tax assessment, you need to check that the assessed taxable income
or the assessed loss and any outstanding income taxes payable to, or refunds due from, SARS are equal to
what you anticipated.
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Specifically, you should check that:
* Your assessment correctly includes all the taxable income disclosed in your tax return;
* SARS has correctly taken into account all the allowable tax deductions that were claimed on the tax
return; and
* All the employee’s tax and/or provisional tax payments that you made during the tax year were correctly
taken into account in the calculation of your outstanding income tax liability.
In addition, you should ensure that you have not incorrectly been charged interest and/or penalties, and
you should check that any prior year balance of assessed loss (where applicable) has been brought forward
correctly to the current tax year.
Satisfied with your assessment?
If you are satisfied with your assessment, ensure that you pay any outstanding tax liability timeously and
within the prescribed deadlines. Remember, a failure to settle your outstanding tax liability timeously may
result in SARS imposing interest and penalties.
What are the prescribed timelines?
An income tax assessment will reflect two dates:
* The due date; and
* The second date (which is usually 30 days after the due date).
Any outstanding income tax liability must generally be paid to SARS by the second date, unless the
assessment reflects an alternative date of payment. If the outstanding income taxes are not paid by the
second date (or an alternative date where applicable), SARS may levy interest on the outstanding income
tax liability from the due date of assessment until the tax due is paid.
It is also important that you ensure that the payment of your tax liability clears SARS’s bank account by the
date on which the payment is due (that is, the second date). Often, taxpayers pay the outstanding taxes on
the second date, but, due to certain bank procedures, the payment reflects in SARS’s records only a day or
two later, resulting in interest being levied automatically. When the second date falls on a day that is not a
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business day (that is, a weekend or a public holiday), the payment of the outstanding tax liability must be
made no later than the last business day before the second date.
Personal Finance
22 October 2012
By Anthea Scholtz
Disclaimer:
The IRF aims to protect, promote and advance the interests of our members.
Our mission is to scan the most
important daily news and distribute them to our members for concise reading.
The information contained in this newsletter does not constitute an offer or solicitation to sell any
security or fund to or by anyone in any jurisdictions, nor should it be regarded as a contractual document.
The information contained herein has been gathered by the Institute of Retirement Funds SA from sources
deemed reliable as of the date of publication, but no warranty of accuracy or completeness is given.
The
Institute of Retirement Funds SA is not responsible for and provides no guarantee with respect to any
information provided therein or through the use of any hypertext link.
All information in this newsletter is
for educational and information purposes and does not constitute investment, legal, tax, accounting or any
other advice.
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