Question:
Please could you clarify the following: I am 55 years old and thus qualify to retire and claim my benefits from my retirement annuity policies. I have one Liberty RA valued at R91 412.50 and another two Old Mutual RA's valued at R130 000.00. From 1 March 2015, legislation will change whereby if the benefits in your retirement annuities are under R150 000.00, then I will be able to cash in my Liberty Life policy as well as my Old Mutual policies, is that correct? From what I've been told by Liberty and Old Mutual, I will be able to cash in those policies as they are under different retirement funds and administered by different companies, is that correct? Therefore, the policies from Liberty and Old Mutual will not be added together as a lump sum of R221 412.50 as the Retirement Funds are different entities, but kept separate and thus qualify on the 1 March 2015 to receive the full benefit as cash as they will be under the R150 000.00, is that correct? The clarity I require is to make sure that the Liberty and Old Mutual policies will not be added together when it comes time on 1 March 2015 to cash in the benefits and that the policies will be treated separate as they are different retirement funds which will not affect each other and thus qualify under the R150 000.00 rule, is that correct?
Answer:
Tony,
We do not agree with Liberty/Old Mutual's interpretation. SARS views your retirement fund affairs in aggregate, and will add the three policies together. If it were otherwise, it would be far too easy to circumvent the provisions of the Income Tax Act by taking out multiple annuities.
