Budget 2025: Employers eye tax cap hike, clarity on retirement reform

Source: Supplied. Blessing Utete, managing director of Old Mutual Corporate Consultants.

“We expect the focus will be on stabilising the Two-Pot System,” Acton says. “While the government has signalled its commitment to auto-enrolment, which could significantly expand retirement-savings coverage to South Africans who currently work but don’t contribute to a retirement fund, its execution will require careful consultation and collaboration before any further announcements will be made.”

Call for a higher retirement contribution tax cap

Industry players, however, are pushing for an increase in the R350,000 tax-deductible contribution cap, which has remained unchanged since 2016 and is out of step with inflation and salary growth. “The retirement fund contribution cap refers to the maximum amount members can contribute to a retirement fund (pension, provident, or retirement annuity) tax-free,” says Acton.

“While historically only higher earners have hit this limit, the introduction of the Two-Pot System may encourage more people to contribute, knowing they can access one-third of their savings in emergencies. Raising the cap would allow those who can afford to save more to do so, improving long-term financial security while reducing reliance on government support in retirement.”

Other key Budget expectations that impact EVP

According to Blessing Utete, managing director of Old Mutual Corporate Consultants, broader policy measures are needed to help businesses leverage employee benefits as a competitive advantage. He is closely monitoring several other factors that could impact retirement reform and workplace benefits.

National Health Insurance (NHI): Further clarification on NHI’s implementation and its impact on employer-sponsored healthcare benefits. Businesses need much more clarity on implications to private healthcare offerings with the national system.

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Incentives for high-demand sectors: Tax breaks for industries such as technology, renewable energy, and manufacturing could enhance business competitiveness and job creation. Infrastructure investment could improve employment conditions and help attract skilled talent.

Wages & cost-of-living relief: Tax incentives or wage subsidies could assist businesses in funding salary increases and performance-based bonuses. Increased skills-development funding would also strengthen workforce resilience and productivity.

A strategic opportunity for employers

The 2025 National Budget presents a crucial chance for employers to enhance workforce financial security, says Utete. "Tax incentives for retirement savings and healthcare could drive greater employer investment in employee wellbeing, and help businesses integrate these benefits effectively into their employee value proposition," he says.

"As businesses grapple with ongoing economic challenges, the 2025 National Budget presents a crucial opportunity to strengthen retirement savings, improve employee benefits, and drive long-term financial security," Acton concludes.

"Collaboration between government, employers, and industry stakeholders will be key to ensuring that policy refinements support both workforce wellbeing and economic growth."