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SARS Rules On Unpaid Pension Benefits

by Lorys Charalambous, Tax-News.com, Cyprus

13 October 2016


The South African Revenue Service (SARS) has issued a draft interpretation note explaining the individual income tax treatment of retirement fund members' unclaimed benefits.

SARS explained that, historically, some members of a retirement fund did not, after exiting the fund, claim the lump sum benefit to which they became entitled to in terms of the rules of the fund. These lump sum benefits were classified as "unclaimed benefits" if they were not claimed after a reasonable period of time.

As the applicable legislation did not regulate when and how a lump sum benefit should be classified as an unclaimed benefit, fund administrators, in many instances, only applied for a tax directive for an unclaimed benefit when the member or the member's beneficiaries claimed it, as opposed to when it accrued.

Before March 1, 2009, a lump sum benefit was deemed to have accrued to a member on the date that he or she became entitled to claim it in terms of the registered rules of the fund. The rules of most funds confirmed that a member became unconditionally entitled to claim a lump sum benefit on the day of his or her resignation, dismissal, retrenchment, or retirement from employment, or on death.

SARS noted that the legislation was amended, with effect from March 1, 2009, to provide that lump sum benefits that become payable under the rules of the fund will only accrue to the member on the date that he or she elects to receive the lump sum benefit as a cash amount, or to transfer the lump sum benefit to another approved fund.

TAGS: individuals | South Africa | tax | investment | pensions | law | retirement | tax authority | legislation | individual income tax | Africa

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