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Given the governments track-record it is no wonder the signing of the NHI bill has left many concerned. 

What we know so far:

– NHI will change nothing immediately.

– It is not clear exactly how it would work or how it would be funded.

– There will be legal challenges.

– And the general consensus is that it could take up to 30 years to implement fully. Whatever ‘fully’ means.

Bottom line is we will have to wait and see what the facts are but it is going to impact each of us one way or another. 

A major concern for retirees

A major concern is that government will fund this by abolishing the Medical Tax Credit (MTC) system. This will essentially increase tax paid for members of these schemes. Less take-home pay. 

If the new NHI did not provide replacement services, and this private cover had to remain in place, it would effectively increase the cost of this cover for the user. Less income for other things.

For those not familiar with their taxes, Medical Tax Credits (MTC) and Additional Medical Tax Credits (AMTC) reduce your tax payable by allowing a deduction.

THE MTC and AMTC includes a calculation which account for medial aid premiums and additional allowable medical expenses.

People older than 65yrs can deduct more than those younger than 65yrs. 

It is designed to give some relief to tax payers who essentially fund government (pay tax) but cannot get the healthcare through the existing system. 

Abolishing this tax benefit is therefore a legitimate concern.

How much would it potentially impact on your pension take home pay?

* Assumptions: Income R450,000. Of which pension is R415.500 and interest income is R34,500.  The calculation is for a single member and the monthly premium is R10,321. This is based on an actual scenario for a 75yr old, who with his current solution pays zero tax on this income including his MTC. Naturally, changing any of the assumptions on the amount of income, the sources of income or the  cost of medical aid would alter the figures above. 

I am not sure there are too many people in retirement who would be happy with a 14% reduction in the amount that lands in their bank account each month?

I guess those seeking to implement the NHI would argue that after NHI was implemented, you would not need to pay medical aid premiums. So if you were not to get the tax credit you would still be better off. 

This would require a massive vote of confidence in this government’s ability to run the healthcare system as well as the private sector. 

Caveat: This is not supposed to be alarmist. You cannot take action until you know the facts. But it is an incredibly important aspect of your financial planning, even more so as we age. It will be a feature we need to account for in the years ahead. 

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