#Budget2022 on early access to retirement savings
- Michelle Acton: Key Account Manager at Old Mutual Corporate Consultants
‘With regard to pension fund reform, we are pleased that the Minister has given the green light for the proposed restructuring of the retirement system for individuals to allow for greater preservation and partial access to funds via the two-pot system.
‘We welcome that the focus has shifted from “immediate access” to improving retirement fund outcomes. More detail is required in terms of the parameters that would allow for early access. This will need to be provided in the draft legislation that will be published for comment towards the middle of the year.
For an explanation of how the two-pot system and early access to your retirement savings will work, watch this video with Andrew Davison of Old Mutual Corporate Consultants.
#Budget2022, Regulation 28 and changes to offshore investments
- Andrew Davison: Head of Advice at Old Mutual Corporate Consultants
‘National Treasury has been working to enhance South Africa’s capital flows management framework. This is important given the increasing global extent of trade and finance, and therefore capital flows.
‘One of the unexpected but nonetheless welcome announcements in Budget 2022 was that the offshore limit of 35% for investments by insurance, retirement and savings funds and the 10% allowed for investments in Africa have been combined. This means that the limit for investments outside South Africa – offshore and in Africa – now is 45% with immediate effect.
‘This gives asset managers breathing room so that they don’t inadvertently breach the cap while also relaxing the constraints on the strategic asset class allocation of a portfolio. It is especially relevant given the increased focus on ESG and sustainability, and will allow retirement funds and other institutions to access a wider set of opportunities for growth as well as diversification.’
Watch this video to see Andrew Davison of Old Mutual Corporate Consultants discuss how South Africa’s 2022 budget will affect consumers.
#Budget2022 and small businesses and entrepreneurs
- John Manyike, Head of Financial Education, Old Mutual
‘Government’s commitment to underwrite the first 20% of losses for banks and other eligible small and medium-sized loan providers to small businesses has been long-awaited.
‘This is a significant move that will encourage loan providers to adopt a less conservative approach to financing small businesses. It will help meet the oft-aired criticism that banks and lenders are far too conservative when assessing loan applications by SME owners. It will also encourage small businesses that have not yet proven themselves to approach institutions for financial support.’
‘The employment tax incentive, which will be increased by 50% to R1 500 a month, will provide an added incentive to SMEs to create work opportunities. As many operate in and draw their labour from nearby communities, this extra money could flow into areas where it is most needed.’
#Budget2022 and investment markets
- Izak Odendaal, Investment Strategist at Old Mutual Wealth
‘There was a strong emphasis on getting government's debt levels under control and on fiscal discipline which is good, as well as a commitment to continuing to roll out reforms that will raise the economy's growth potential over the long term.
Thanks to a very large tax overrun because of high commodity prices, we will see government debt levels stabilise at an earlier stage and at a lower level than we initially had thought. That should be good news for the bond market because it means the government will have to borrow less money than anticipated for the equity market.
‘There are risks and things can still go wrong but I think we are definitely moving in the right direction, and therefore we shouldn't expect any further credit ratings downgrades.’
Watch this video with Izak Odendaal for his full commentary on South Africa’s national budget for 2022 and your investments.