Summary of Key Points of Discussion – Conference Held on 20 June 2025

Topic: Retirement Policy, Tax Reforms & Strategic Implications

Tax

The Finance Bill 2025 and the Tax Laws (Amendment) Act 2024 proposed various changes to income tax, including updates to employee benefit taxation and clarification on the treatment of pension and gratuity-related benefits.
New tax brackets and increased allowable deductions for pension contributions were proposed to enhance retirement savings.
Certain outdated income tax provisions were repealed to better reflect current economic conditions.
Adjustments were suggested for employment-related taxes, including fringe benefit tax thresholds and taxation of perquisites such as housing and car benefits.
Amendments to the Tax Procedures Act introduced stricter compliance timelines and enhanced powers for the Commissioner regarding assessment and enforcement.
A key legal precedent cited was the case of Banki Kuu Pension Scheme vs Commissioner of Domestic Taxes, which pointed out pension exemptions and timing of benefit realization for tax purposes.

NSSF

The NSSF Act, 2013 was declared constitutional in 2023, enabling the implementation of a new income-based contribution model (6% of monthly pensionable earnings).
The Act introduced a tiered contribution system where Tier I is based on a gazetted minimum wage and Tier II progressively scales from 50% to 400% of the national average earnings.
These changes significantly increase the funds managed by NSSF and the operational costs for employers, especially those without private pension schemes.
Contracting-out provisions allow employers to direct Tier II contributions to private schemes, subject to approval by the Retirement Benefits Authority and notification to all relevant stakeholders.
The rationale behind contracting out includes the historically better returns from private schemes, more control over investments, and improved service levels.

PRMF

In discussions on post-retirement medical cover, it was noted that many retirees face challenges accessing affordable healthcare.
It was agreed that developing a sustainable and effective post-retirement medical product requires a survey to understand the real healthcare issues faced by retirees, ensuring the product is needs-driven and viable.