July 2021 IDM Special Edition

YOU SHOULD BE
SAVING
BUT YOU ARE
NOT
Issue 7 of 2021

Joi
EXCELLENCE IS DOING
ORDINARY THINGS
EXTRAORDINARILY
WELL
– John W. Gardner

n
WHAT MAKES US
EXCELLENT?
/ Unimpaired and automated PDA systems
/ Integration with top-ranked Debt Counsellor systems
/ Enhancing Debt Counsellor efficiency and sustainability
/ Best customer support in the country – queries are resolved within 24 hours
/ Strong compliance and best-industry-practice implementation is at our centre
Call Chris van der Straaten
Head of Hyphen PDA | 082 557 0437
Or call our friendly support centre on 011 303 0060 - Option 2
or visit our website www.hyphenpda.co.za

FROM THE
IDM DESK
IMPROVING YOUR
CREDIT SCORE
FOR BETTER
FINANICAL
HEALTH
Consumers often ask what
the best methods are to
improve credit scores.
A credit score is determined by
several factors, primarily how
long the consumer has been
credit-active, the consumer’s
payment record, what type of
credit the consumer has, how
much of their credit card (if they
have) they are utilising, and a
few other factors.

While a higher credit score generally makes the consumer a more
attractive lending prospect, it is not always easy to know what a high
credit score is.
More interestingly, high credit scores sometimes are driven by the fact
that consumers – in some cases those who can ill afford it – use their
credit cards to such a high extent every month that their credit card
“utilisation” is high.
We do understand this consumer’s predicament, which is also shared by
millions of young people: where does one start to build a credit history?
The advice that is generally given is to start small: With an insurance
product (such as cellphone insurance) or a retail credit account. It is also
important to have a transactional banking account to show evidence of
money management to potential lenders. Our advice to this consumer
would be to follow this path and start small. Get a cheque account in
place and use it regularly for transactions.
When it comes to credit, if the consumer’s aspiration is to buy a house,
then do not accumulate a lot of unsecured debt that is expensive; rather
borrow what you can pay back at the end of the month or better yet save
each month so that amount can be used towards a deposit for a house.
DebtBusters offer consumers the opportunity to also get their FREE credit
report every month – just register on:
www.debtbusters-client.co.za

FROM THE EDITOR
Let’s face it, July 2021 is probably going down in our
history books as the “month of shame”.
In the wake of the ex-President being incarcerated, (for repeatedly
ignoring the highest court in the country) people in areas of KZN
and Gauteng began a criminal spree under the guise of a protest. As
these citizens took to the streets to commit theft, arson, violence and
even murder, they exposed not only their disregard for the authority
of the courts, but also their disrespect of the laws of the country.
With over 300 people losing their lives, these have been really dark
days. These events have highlighted political divides and the intense
level of discontent that people, all over this country, are feeling.
Then of course, there are the financial ramifications. The fallout
from the few days of looting and violence, will be felt for a long
time to come. Not only did countless small businesses come under
attack, but in the wake of the devastation, the workers and staff of
these businesses have been hard hit with job losses and income
loss. Government has fortunately stepped in to try and offer some
assistance and relief to those affected.
The Rand and foreign investment confidence took a real kick in the
teeth, and those affected will be experiencing bleak times for a while
to come. Of course, it is reminiscent of the chaos and confusion in
the USA during the storming of the Capitol by politically unhappy

people, who realized that they actually hate the democratic process.
The USA experienced riots during the “BLM” protests too; SA is just
one of many countries around the globe that is cracking under the
pressure of the pandemic and social unhappiness.
That being said, it is best to focus on the positive, once the worst of
the looting and murders were over, regular South Africans picked up
brooms and made an effort to clean up and get things back on track.
There are stories of taxi associations protecting malls, and regular
citizens putting themselves in harm’s way to help protect others.
There are moving pictures of regular people helping rescue babies
from burning buildings - inspiring stuff!
However, in the midst of all that, the banks still want to get paid. The
demands for payment have not stopped just because thousands of
people lost their minds and morals, nope, life goes on. So, with that in
mind, we are going to spend some time this issue talking about how
you are not saving, and why it is basically impossible to do so… or is
it? We will also look at other financial news, discuss retirement; look
at a common misconception in debt review and more.
We hope that you made it safely through, we hope we never see a
repeat of the recent chaos, we hope that if you got swept up in the
madness and grabbed a flat screen TV, you have come to your senses
and returned it. Please stay safe and try stay positive despite the
challenges we face. Let’s not get bogged down in all the negatives
that life throws at us, and rather focus on the positives, like helping
others or paying off your debts and finally becoming debt free.

DEBT REVIEW
LESSON #1
Never miss a Debt Review payment.
It can derail all the progress you have
made so far in your debt review. If you
see trouble coming then talk to your Debt
Counsellor right away.

CONTENTS
YOU SHOULD BE SAVING
BUT YOU ARE NOT
DEBT STRESS &
OUR EMOTIONAL
HEALTH
MUST A DEBT REVIEW
APPLICATION BE
REFERRED TO COURT
WITHIN 60 DAYS?
RETIREMENT
AND TAX
SERVICE
DIRECTORY
DISCLAIMER
Debtfree Magazine considers its sources reliable and verifies as
much information as possible. However, reporting inaccuracies
can occur, consequently readers using this information do so
at their own risk. Debtfree Magazine makes content available
with the understanding that the publisher is not rendering legal
services or financial advice. Although persons and companies
mentioned herein are believed to be reputable, neither
Debtfree Magazine nor any of its employees, sales executives
or contributors accept any responsibility whatsoever for their
activities. Debtfree Magazine contains material supplied to
us by advertisers which does not necessarily reflect the views
and opinions of the Debtfree Magazine team. No person,
organization or party can copy or re-produce the content
on this site and/or magazine or any part of this publication
without a written consent from the editors’ panel and the
author of the content, as applicable. Debtfree Magazine,
authors and contributors reserve their rights with regards to
copyright of their work.

CONSUMER FRIEND
USES
SOFTWARE TO ENSURE
POPIA COMPLIANCE!
- Secure system-to-system data transfer (no human contact)
- Elimination of data exposure from the use of email
- Data specification is fit for purpose
POPIA COMPLIANCE IS
CRUCIAL THIS YEAR!

BREAKING
NEWS

DIRECT AXIS RECKLESS
LENDING COURT MATTERS
Direct Axis are concerned that their automated email system
is not picking up certain court documents that are being
sent and getting them to the right people internally.
The concern relates mainly to matters that include any
mention of reckless credit (which all credit providers need
to defend against due to the threat of fines and more from
the National Credit Regulator (NCR).
So, they have asked Debt Counsellors to please use the
proper address for these matters namely:
Legal@directaxis.co.za
This address is where Debt Counsellors should already be
sending notices of motion, founding affidavits, supplementary
affidavits, draft court orders etc.
This applies to accounts with DirectAxis Personal loans,
DirectAxis Secured loans, CallDirect Personal loans, Wesbank
CashPower Personal loans, Clientele Personal loans, IFA
Personal loans, Telesure Personal loans and Credit Cart.

We are the champion
in your corner!
DebtBusters provides a remedy for financially stressed
consumers through effective debt relief solutions.
Over 1 million South Africans who are facing tight
budgets and are struggling with debt, have come to
DebtBusters looking for a financial solution.
086 999 0606
info@debtbusters.co.za
www.debtbusters.co.za

DEBT REVIEW AWARDS GALA
- 10TH SEPTEMBER
The Debt Review Awards Annual Gala will be broadcast live
over YouTube on September 10th. All are invited to tune in.
The Annual Debt Review Awards Gala is a small black tie event
held in a major SA city around the middle of the year. Due
to the Pandemic and Lockdown last year (2020), the event
was moved online and was held in September. This year, the
event will also be held online due to Covid-19 precautions
(they can’t even keep Covid-19 out of the Olympic Village).
Zak King, Founder of the Awards and the Editor of Debtfree
Magazine says: “For now, we have decided to be cautious
and focus our efforts online.”
The annual Peer Review process has been underway and
the results of those reviews will be shared on Friday 10th
September in the afternoon. The event should close around
4 pm to enable those who have to travel to do so.
The event features speeches, presentations, entertainment
and updates from the NCR and others. There will also be
a pre-show from mid morning which will feature in-depth
interviews and group panel discussions about hot industry
topics (for those who work in the industry). These will also
be available to enjoy on the YouTube stream.
For more info head over to www.debtreviewawards.co.za

DEBT COUNSELLORS TO HAND
IN QUARTERLY REPORTS
Debt Counsellors should organize to hand in their obligatory
quarterly reports to the NCR for 01 April 2021 – 30 June
2021. These reports should be handed in before the 15th of
August 2021.
The form should be sent to the NCR at:
dcreturns@ncr.org.za

PROBLEMS WITH
NCR DEBT HELP?
Every time a new consumer applies for debt review, the
Debt Counsellor who is helping them has to go onto the
National Credit Regulator’s database site (NCR Debt Help)
and capture information about the consumer.
Some of this information is then passed along to the Credit
Bureaus so they can ‘flag’ the consumer as having applied
for a review of their debt situation.
Recently, Debt Counsellors have been complaining that
they are having some difficulty listing new clients on the
system. Others are saying they are struggling to transfer
clients from one Debt Counsellor to another when this is
required. The system seems to be acting up some of the
time.
Debt Counsellors have been assured that the NCR IT team
are working hard on the matter and that Debt Counsellors
will be officially updated when this is totally resolved.

WILL THEY GET YOU A LOAN
OR JUST TAKE YOUR MONEY?
Thousands of consumers have for years been taken in by a
network of websites offering to source them loans… for a
monthly fee.
Desperate consumers who mistakenly signed up for what
they thought was a loan soon found out that they had
actually just signed up for “legal services” and allowed
these companies/websites linked to Lifestyle Direct Group
International to debit their accounts monthly.
The loans they so desperately needed never materialised
as, in most cases, the consumers simply do not qualify for
more debt. Instead Lifestyle Direct Services International
would milk their accounts for what they could before setting
their collections people loose on these already troubled
consumers.
With so many consumers being taken for around R400
(initial fee) and then R99/month for up to 12 months in debit
orders it is hard for any single consumer to take the matter
to court. It will cost them much more than that just to have
the matter set down.

Fortunately, the Stellenbosch University Law Clinic has
gotten involved and has asked the High Court for permission
to bring a class action suit against the two owners of Lifestyle
Direct Group International.
The idea behind the class action is to also avoid thousands of
cases at the small claims court level. The High Court agreed
to the class action and that the case can be an ‘opt-out’
class action (where if consumers who were scammed do
not want to be part they must specifically say so otherwise
they will be included).
Already the owners are in a lot of trouble as the so-called
service they offer consumers (not actually giving loans) was
supposedly ‘legal services’. That’s a problem since they were
not actually registered with any legal entity or body.
So, not only were people not getting the loans that they
thought they were getting, but they were also not getting the
services actually promised in the fine print of the agreements
these consumers got locked into either.
This will be fully explored during the case but already it is not
looking good for the owners Damian Malander and Nandie
Piach.

YOU SHOULD BE
SAVING
BUT YOU ARE
NOT

YOU SHOULD BE SAVING, BUT YOU ARE NOT
YOU SHOULD
BE SAVING
We all know we should be saving. It is one of those
things your mom told you when you were young, your
teachers told you at school and certainly one of the
things a Debt Counsellor will tell you if you go to them
for help.
The truth is that you are not saving even though you know you
should. Saving is very hard to do these days.
So we ask:
• Has it become impossible to save?
• Is it even practical to think about saving when you have lots of
debts and are just struggling to make ends meet?

NO BUDGET WILL
“MEAN NO SAVING!”

YOU SHOULD BE SAVING, BUT YOU ARE NOT
WHY YOU ARE NOT
SAVING: BUDGETING
It is almost a universal rule that we all spend just a little
more than we earn. Things seem to be more expensive
now than ever before and the money we get paid
hardly stretches to cover all our necessary expenses.
And that’s before we even begin to look at all our scary
debts.
One reason why you are not saving is because you do not have a
good budget. Admit it!
Making a budget is a pain and makes you confront how scary your
debt situation is. So, nobody likes to make a budget, even if it is a
good thing to do. But if you don’t budget then you can’t effectively
plan ahead for expenses you need to save towards.

YOU SHOULD BE SAVING, BUT YOU ARE NOT
WHY YOU ARE NOT
SAVING: INFLATION
It is also true that things do cost more now than
they did last year. These days just having work is a
victory and expecting an annual increase is not always
realistic.
Businesses are cutting back on salaries and employees not handing
out increases and bonuses. So, keeping your job is probably more
important than arguing over an increase right now.
Even if you do miraculously get a raise this year it is likely that it will
be a smaller percentage increase than your cost of living has gone up.
So, you might get a 5% increase while your rent goes up by 10% and
your food bill goes up by 6%. What that means is less money in your
pocket at the end of the day.

When you get a 3% raise
but inflation is 5.4%

YOU SHOULD BE SAVING, BUT YOU ARE NOT
SAVE BY PAYING
OFF DEBT
These days the interest you get from putting money
into a bank savings account is often not that great. Few
banks really reward you for depositing money with
them.
That said, you might start banking with a bank that will reward you with
a really great…7% interest on your savings account (which keeps you
ahead of the interest rate right now) and be really happy with yourself.
At the same time, however, you may be sitting with lots of credit card
debt which is increasing at 18%. So while you are making 7% on one
side (your savings) your debt is growing by 18%.
You can quickly see that paying off your debt to stop it from growing
would actually end up saving you a lot more money over time than
setting funds into an account and your savings only growing a little.
So, getting rid of your expensive debts is actually a great way of saving
yourself money over time. But what about the normal type of saving?

YOU SHOULD BE SAVING, BUT YOU ARE NOT
WHY YOU NEED
SOME SAVINGS
If you have entered debt review then a Debt
Counsellor will help you make up a budget (you know,
the one you kept meaning to make up). They will help
you figure out what is realistic and sustainable*.
A big part of a budget is figuring out what you need to cover each
month. These are called your running costs.
A good budget is also designed to take into account things that you
only pay once a year (annually). These might be things like school
related expenses for your kids or annual obligations like your car
license or TV license (yes, you should be paying that).
A good budget will also include some things you may have forgotten
to take into account such as saving towards new tyres every so many
Kilometers or the regular servicing your car at certain intervals (if you
own one) or even setting funds aside to cover your insurance excess
should it be needed.

Normally, people who enter debt review have already cut all these
types of savings to try to just make ends meet and this is why they
become so vulnerable to sudden issues to do with unplanned medical
bills or broken appliances or accidents.
If you have no access to endless credit (like once you start debt
review) then you cannot just reach for the credit card again if
something suddenly comes along. You need to have the funds
already sitting one side.
* If you deal with a Debt Counselling firm that simply tells you
that your new total budget figure is just X but gives you hardly
any details of how that is made up, then you should ask for a
much more detailed breakdown from them. Find out exactly
how they think you should be spending your available funds
each month. Everything from groceries to medication should
be included. This is a vital part of making your debt review
actually work.

YES YOU CAN

YOU SHOULD BE SAVING, BUT YOU ARE NOT
YOU CAN SAVE
So, it is important to have some funds set aside in
advance for either a rainy day or regular annual
expenses. How can you do this?
If you are in debt review then your Debt Counsellor will have worked
some savings towards annual costs into your monthly budget. The trick
is to actually follow through and set the funds aside each month before
you spend them on other things.
With the advent of savings pockets etc you should be able to do this
with minimal effort by clicking a few buttons on your banking app. If
you are not making use of a banking app then you may need to go old
school and transfer funds from one account to another. Alternatively
you may be hiding money under the mattress (don’t do this).
Whatever the case, you should move any funds you have in your
budget for savings first, right after you get paid. Do not plan to do this
later in the month or there will be nothing left, guaranteed.

YOU SHOULD BE SAVING, BUT YOU ARE NOT
HOW MUCH SHOULD
YOU BE SAVING?
It is unrealistic to think you will be able to save a lot of
money when under debt review. Rather we are talking
about regularly saving a little something.
Once again you should go back to the budget drawn up with the help
of the Debt Counsellor. It will serve as a guide. Your Debt Counsellor
will have added up all your annual expenses and divided them by 12
(approximately).

YOU SHOULD BE SAVING, BUT YOU ARE NOT
DOES YOUR
BUDGET NEED
TO BE ADJUSTED?
If that budget was done some time ago then why not
go back to the Debt Counsellor and ask for some help
to update it? As your cost of living changes you will find
you will need to relook at your budget from time to time.
If you find that you are not able to set aside the saving amount
calculated by your Debt Counsellor then you need to seriously look at
changing your other expenses.
This may involve changing what you are buying at the shops or
how much you are spending on transport, communication or other
costs. This can take effort and may require you to make even more
adjustments than you did at first when entering debt review.
Here we are talking about making moves to stay with family, changing
service providers, renting out rooms and other big steps. Though not
easy to put in place, it will help you stay within your budget.
Your goal is to get rid of your debt entirely and be debt free, this might
be complicated and sting a little but it will be worth it in the long run.

YOU SHOULD BE SAVING, BUT YOU ARE NOT
SAVING WHILE
IN DEBT REVIEW
IS POSSIBLE
Remember, each time you make a payment towards
your debt through debt review you are actually
saving yourself a lot on fees the credit providers are
not charging and interest rates they have probably
lowered.
You may also find that with things getting more and more expensive
over time you may feel tempted not to save anything. You may
eventually need every cent possible to cover your increasing everyday
costs. If this is the case then you seriously need to look at your
monthly running costs and make some more big changes to cut
them. Ask your Debt Counsellor for help.
Often the key is as simple as (1) knowing how much you need to save
each month and then (2) setting those funds aside right away once
you have been paid.
Even if you have not been saving up till this point, why not start this
month? As they say: “better late than never”.

DEBT STRESS
& OUR EMOTIONAL HEALTH

DEBT STRESS & OUR EMOTIONAL HEALTH
DEBT IS NOT A
NEW PROBLEM
Throughout history someone, somewhere has owed
someone else money and this has caused them stress.
After all, if you owe someone money, eventually they
are going to want it back.
Dealing with those demands for repayment can be very stressful. It
can even lead you to some very dark and lonely emotional places.
Debt has long been a problem for South Africans, but it seems that
the COVID-19 pandemic has spread the misery to millions more
people than before. Along with the increase in debt there has been an
increase in emotional problems linked to stress and anxiety.
Regardless of the cause, debt often wreaks emotional havoc on our
psyche and our family life.

DEBT STRESS & OUR EMOTIONAL HEALTH
DEBT’S NEGATIVE
EFFECTS
Among the negative effects of dealing with debt are
low self-esteem and even impaired cognitive function.
That means that you can’t learn, remember, pay
attention or solve problems when you’re busy freaking
out over something like your overdue municipal bill.
It is a fact that debt can hurt, really hurt. A study found that those
with higher levels of debt and/or unemployment were more likely to
purchase over-the-counter painkillers as well as anti-depressants and
anti-anxiety pills just to help them cope.
A research team discovered that simply thinking about financial
insecurity was enough to increase pain levels. People reported
feeling almost twice as much physical pain after recalling a financially
unstable time in their life, compared to those who thought about a
financially secure time.
It’s rare for someone to go through their entire life and never
experience any money problems. Trouble arrives unexpectedly, jobs
disappear suddenly, marriages fail, people get sick and bills just keep
piling up. Nobody is immune, especially during (and probably long
after) a global pandemic.

DEBT STRESS & OUR EMOTIONAL HEALTH
THE LINK BETWEEN
STRESS AND DEBT
We know being in debt causes stress but could there
be a link the other way around? Can stress lead to
debt?
Well, it seems that debt and stress can be part of a vicious circle.
After years of research, it has been found that worrying about debt
triggers stress, which drives negative behavioural patterns - negative
behaviour that compels some consumers to spend without restraint.
You may have heard of terms like “retail therapy”. People often spend
to feel powerful and free, even when they do not have the means to do
so. And this can drive a person into debt just as fast as an unplanned
financial emergency caused by a car accident, for example.

DEBT STRESS & OUR EMOTIONAL HEALTH
FIVE WAYS TO DEAL
WITH FINANCIAL
STRESS
Regardless of how anyone gets into debt, it will always
trigger unsettling emotional responses that are hard
to deal with. So, what can help you to cope with these
negative feelings and concerns?
Debt can lead to stress and many negative emotions and those
feelings and the stress can lead you to make bad choices that
create even more debt. Being aware of this is important. It can help
you better cope with the way you feel and act about your financial
situation.

1DEBT STRESS & OUR EMOTIONAL HEALTH
TALK TO
SOMEONE
ABOUT IT
If you are feeling low about your money problems,
you may feel very isolated. You need to confide in
someone.
You may not feel free to talk to family and friends because you don’t
want to stress them with your challenges. Talking to someone neutral
like a Debt Counsellor, who helps people deal with their debt stress all
day, can really help.
A Debt Counsellor will sit down together with you (or virtually over
Zoom or on the phone if that’s safer) and work out a personalised
game plan to help you deal with your debt and become as financially
successful as possible in the future.

DEBT STRESS & OUR EMOTIONAL HEALTH
2
ADJUST YOUR
SPENDING
Chances are, there are still some expenses you can
reduce or cut out that can immediately relieve some
pressure.
Review your spending and eliminate expenses that aren’t absolutely
essential. Prioritize according to necessity – basic needs such as food,
housing, utilities and children’s expenses come first, and everything
else is included after that. Write it down.

3DEBT STRESS & OUR EMOTIONAL HEALTH
CONFRONT
THE PROBLEM
Rather than hiding from your credit providers and bill
collectors, choose to be calm and pro active.
Why not make the first move and contact your creditors to explain
your new financial situation? Let them know the details of what led to
the problem (even if it was your “fault”) and how you plan to fix it.
They are also people with families and economic challenges of their
own. The best thing you can do is talk to your credit providers and
create a plan of action.

DEBT STRESS & OUR EMOTIONAL HEALTH
4
PUT IT IN
PERSPECTIVE
Focus on the good things in your life rather than all the
challenges you face.
Ask yourself; are you ‘relatively’ healthy? Do you have the love and
support of friends and family? It might be difficult initially, but being
optimistic is key to making positive changes.

5DEBT STRESS & OUR EMOTIONAL HEALTH
FIGHT
INERTIA
Doing nothing will not help your situation. Get up and
get out (but resist the urge to shop if your spending is
out of hand).
If you are already buried under debt, but keep receiving offers for
credit cards or store accounts, destroy them and throw them away.
Lockdown can make you feel caged at home and feed on the urge to
roll up in a ball and hide.
Why not start doing a little exercise? Why not take the dog for a walk?
Why not get the ball rolling and make a call to a Debt Counsellor and
ask about how they recommend you deal with your situation?

DEBT STRESS & OUR EMOTIONAL HEALTH
DEAL WITH DEBT
& FEEL BETTER
Being in debt is stressful but it really doesn’t have to
take all the joy out of your life. There are many ways
to deal successfully with debt. As we have seen, there
are things you can do to start to deal with or debt and
negative emotions.
Remain positive by focussing on the good things in your life and
remember there are many options to help you navigate your way out
of debt. Sometimes all you have to do is ask for help. Speak to a friend
or family member or, even better, a professional Debt Counsellor today
and begin to take steps to reduce your debt stress.

DEBT REVIEW
LESSON #2
It is possible to change Debt Counsellors
while under debt review.
However if you are having problems with
your current Debt Counsellor please try to
communicate with them and explain the
problem before deciding making such a
complicated change.

POPI ACT
PROTECTION OF PERSONAL INFORMATION
P e r s o n a l i n f o r m a t i o n i s d a t a t h a t c a n b e u s e d t o
i d e n t i f y a s p e c i f i c p e r s o n
IDENTIFYING
DETAILS
CONTACT
DETAILS
DEMOGRAPHICS
BACKGROUND
INFORMATION
FINANCIAL
SOCIAL
MEDICAL AND
HEALTH
D o n o t l e a v e d o c u m e n t s o r s c r e e n s t h a t c o n t a i n p e r s o n a l i n f o r m a t i o n o p e n f o r a n y o n e t o s e e .
S h r e d o r p r o p e r l y d e s t r o y / d e - i d e n t i f y d o c u m e n t s t h a t a r e n o l o n g e r r e q u i r e d f o r w o r k p u r p o s e s .
R e g u l a r l y u p d a t e y o u r p a s s w o r d s t o s y s t e m s a n d a p p l i c a t i o n s t h a t c o n t a i n p e r s o n a l i n f o r m a t i o n .
A v o i d s e n d i n g s e n s i t i v e i n f o r m a t i o n o v e r e m a i l a n d c o m m u n i c a t i o n d e v i c e s .
D o n o t s t o r e s e n s i t i v e i n f o r m a t i o n o n d e s k t o p s o r f l a s h d r i v e s t h a t c a n b e e a s i l y i n t e r c e p t e d .

RETIREMENT
AND TAX

RETIREMENT & TAX
RETIREMENT & TAX
You may think that, at least, when you retire you will
finally be able to stop worrying about paying tax.
We have some bad news for you…
Even if you are no longer working, but do receive annuity income,
you might still have to carry on paying tax, depending on how much
you receive.
If you are receiving above a particular threshold then every year you
will be required to declare income from your annuity (and any other
income like investments) on your tax return.
Especially if you decide to take a large lump sum payout from your
retirement fund you will also be in line to pay tax.
Let’s look at both these situations and see what tax may apply.

RETIREMENT & TAX
LUMP SUM PAYOUTS
FROM YOUR PENSION
If you have retired and want to take out a portion of
your retirement interest as a lump sum payment then
you are able to take 1/3rd of the interest in that fund.
The remaining 2/3rd will be paid out in the form of an annuity (a
regular pension over time).
Note: If however, if your total interest in the fund is less
than R247 500, then you can take the full retirement
interest as a lump sum in one go.
For most people when you retire and have a provident fund (or
provident preservation fund) your retirement interest is usually paid
out as a lump sum (unless the rules of your fund only allows for
annuity payments).
If you have already retired and get an annuity income (from a living
annuity arrangement) then you are allowed to draw the amount as a
lump sum, if the full remaining value of the assets end up being less
than R125 000.
Tax on these funds is calculated on the gross retirement fund lump
sum benefit (after taking a few past tax things into account).

THE RETIREMENT FUND LUMP SUM BENEFIT
FOR THE 2020 TAX YEAR IS TAXED WHEN YOU
RETIRE USING THESE SPECIAL TAX RATES:
Taxable income from
lump sum benefits
Rates of tax
1 – 500 000 0% of taxable income
500 001 – 700 000 18% of taxable income above 500 000
700 001 – 1 050 000 36 000 + 27% of taxable income above 700 000
1 050 001 and above 130 500 + 36% of taxable income above 1 050 000
Note: ALL lump sums received from a retirement fund,
whether as a result of retirement or maybe as part of a
severance benefit are taxed on a cumulative basis. This
means that when you eventually retire, the total value
of all the lump sum benefits received (after 1 October
2007), will be taken into account when working out the
tax payable on your current retirement fund lump sum
benefit.

RETIREMENT & TAX
ANNUITY PAYOUTS
FROM YOUR PENSION
As mentioned earlier, you may have to pay tax if you
are getting a big enough pension payout monthly
(worked out on a total annual figure).
It all depends on if the payout is more than a particular threshold
amount. You may be wondering what those threshold amounts are.
Here is a quick look at the recent threshold amounts are for different
age groups:
For the 2021 year of assessment
(1 March 2021 till 28 February 2022):
• Person below the age of 65 – R87 300 per annum
• Person aged 65 and above but not yet 75 – R135 150
• Person aged 75 and above – R151 100.
For the 2021 year of assessment
(1 March 2020 till 28 February 2021):
• Person below the age of 65 – R83 100 per annum
• Person aged 65 and above but not yet 75 – R128 650
• Person aged 75 and above – R143 850.

RETIREMENT & TAX
NEED MORE INFO?
If you are fortunate enough to be getting a healthy
retirement annuity or have an amount that you wish to
draw as a lump sum then do not forget that SARS want
their cut.
If you are feeling a bit confused about all this then it is often a good
idea to talk to your Debt Counsellor or a tax professional who can
guide you to where to find the most up to date info.
Resources:
For more info on applicable tax rates and info head over to the SARS
website here:
See more tax rates here
https://www.sars.gov.za/tax-rates/
For more information on tax and retirement, check out this guide
from SARS here:
Guide on the calculation of the tax
payable on lump sum benefits.
https://bit.ly/3j1VG1T

DEBT REVIEW
LESSON #3
Beware of scams which promise to help
you get out of debt review for a fee.
Debt review is a legal process and the
credit bureaus will keep a record of it until
your debts are paid off.