Lizl Budhram | Head | Advice | Personal Finance | Old Mutual | mail me |
As South Africans braced for a heavier tax burden, the 2025 Budget Speech delivered a mix of relief and reality.
While tax increases were lower than feared, financial advisers will soon need to navigate a complex landscape of regulatory reforms.
The Conduct of Financial Institutions (COFI) Bill marks a turning point in financial services regulation. Government expects to finalise it in the near future.
2025 budget and tax reforms present opportunities
The financial services industry has waited with bated breath for the COFI Bill. The Budget confirmed that government will finalise and implement it soon.
For financial advisers, the 2025 budget and tax reforms reinforce their role as essential financial partners for customers. Those who prioritise governance, trust and customer education will distinguish themselves in a more regulated environment. This progressive legislation aims to strengthen customer protection, build confidence in financial services, and improve governance.
While the current Financial Advisory and Intermediaries Services (FAIS) legislation focuses on product licensing, the draft COFI Bill shifts the regulatory focus to the activities of financial advisers.
COFI will streamline financial conduct laws and align with recent reforms. These reforms include the 2024 consolidation of banking, credit, long-term insurance and short-term insurance ombuds into a single entity. As a result, customers will find it easier to resolve disputes.
2025 tax and fiscal reforms – managing two-pot withdrawals
With COFI’s implementation, financial advisers will face a higher standard of customer care. This is especially relevant when guiding customers through complex decisions related to the two-pot retirement system. In this system, customers must weigh short-term financial relief against long-term retirement security.
The two-pot retirement system has generated far greater tax revenue than government anticipated. This outcome underscores the critical importance of sound financial advice.
Initially, the government expected to collect R5 billion in tax from two-pot retirement system withdrawals. However, it collected R11.6 billion – more than double the estimate. This outcome suggests that many customers either face greater financial pressure than expected or withdrew funds without fully understanding the tax implications.
Since government taxes withdrawals as normal income, financial advisers must ensure that customers understand the financial impact. In addition, they must align these decisions with the customer’s long-term financial plans.
There is a big job ahead for financial advisers in helping customers make better financial decisions. Many people feel tempted by immediate access to funds. However, these choices carry lasting consequences for their financial security.
VAT increase and fiscal drag
The 2025 budget confirmed a 0.5% Value Added Tax (VAT) increase from May 2025. Furthermore, government may implement a further 0.5% hike in April 2026.
Meanwhile, income tax brackets remain unchanged. This means income earners will experience fiscal drag – where inflation pushes them into higher tax brackets without corresponding tax relief.
For the second consecutive year, government has not adjusted tax brackets. As a result, all taxpayers and their families will see more of their disposable income eroded by fiscal drag. Treasury expects to raise an additional R28 billion in 2025/26 from this alone.
With rising indirect taxes and increasing VAT, financial advisers now have a timely opportunity to assist customers. They can help customers navigate these changes, optimise tax strategies and preserve wealth.
In conclusion
Now more than ever, financial advisers need to help customers prepare. This includes managing tax hikes, protecting retirement savings, and adjusting financial plans to cope with rising costs.
The financial regulatory landscape is changing rapidly. However, these shifts present new opportunities for financial advisers to offer expert guidance.
By staying informed, leveraging compliance support, and proactively engaging with customers, financial advisers can reinforce their role. They remain trusted partners in securing their customers’ financial well-being.
