BGR 58: Purchase of different types of annuities at retirement.

ServicesTaxTax alertsAlert 25

BGR 58: Purchase of annuities at retirement.

This BGR confirms that, for income tax purposes, any annuity purchased or provided by any retirement fund must be compulsory, non-commutable, payable for and based on the lifetime of the retiring member or the value of the member’s retirement interest. It also confirms that the annuity may not be transferred, assigned, reduced, hypothecated or attached by creditors.

General Note 12, issued on 20 July 1995, confirmed that even though some approved pension, provident and retirement annuity funds were, in terms of the rules of those funds, terminating that retirement fund’s liability to pay an annuity, the retirement fund could not terminate its liability to pay an annuity. General Note 18 replaced General Note 12 with effect from 1 September 2008.

General Notes 18 and 18A were issued following discussions held with various representatives of the retirement fund industry. By virtue of an agreement, retirement funds were permitted to terminate their continued liability in respect of a retiring member once an annuity was purchased, subject to certain terms and conditions as laid out in General Notes 18 and 18A. Both General Notes 18 and 18A were withdrawn on 26 February 2021. This binding general ruling (“BGR”) is now issued to provide clarity after the withdrawal of General Notes 18 and 18A.

A copy of BGR 58 can be accessed here.

19/11/2021

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