Johnathan Paoli
President Cyril Ramaphosa has signed into law, the Pensions Funds Amendment bill which seeks to amend pension-related legislation in order to enable the implementation of the recently legislated two-pot retirement system, geared towards bolstering retirement savings.
Spokesperson Vincent Magwenya, made the announcement on Sunday and said the new bill amends the Pension Funds Act of 1956, the Post and Telecommunications-Related Matters Act of 1958, the Transnet Pension Fund Act of 1990 and the Government Employees Pension law of 1996.
Magwenya said the act requires pension funds to amend their rules, adjust their investment portfolios and prepare administrative systems for pension fund members to apply to access portions of their pension funds from 1 September this year.
“This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds,” the spokesperson said.
The proposed reform to the retirement saving regime, which is expected to introduce a “two-pot” retirement system starts in September, where one-third of retirement contributions will be split into a savings component and two-thirds into a retirement component.
Magwenya explained that the money from the savings component will be available for withdrawal at any time before retirement, with the ability to access amounts to be provided without the member having to cease employment or resign; and that a member will be allowed to make a single withdrawal within a year of assessment.
He said the minimum withdrawable amount is R2000 and that the ability to withdraw would be subject to a fund or contractual basis.
The spokesperson confirmed that withdrawals will be added to the individual’s taxable income, to be taxed at their marginal tax rates.
In terms of the retirement component, Magwenya said it will be housed within the current retirement fund and assets will be required to be preserved until retirement.
“Once a member has reached retirement age and retires, the retirement component is to be paid in the form of an annuity, which includes a living annuity,” he said.
The Financial Sector Conduct Authority (FSCA) launched a “Know Your Rights” campaign in order to educate the public about the proposed reform of the retirement system.
The campaign is expected to run until the end of September, and will also focus on other aspects of retirement funds including consumer rights, how retirement fund contributions operate, and the recourse available to consumers when employers fail to make contributions.
In addition, the FSCA has stated that it is collaborating with the financial industry and other key stakeholders to ensure that this campaign reaches as many South African retirement fund members as possible.
Head of Fund Governance and Trustee Conduct, Zareena Camroodien, said last week that the FSCA was still waiting for more than 350 retirement funds to submit their respective rule amendments that would assist facilitating the implementation of the two-pot retirement system.
Camroodien said the authority has so far received rule amendments for 500 out of the current 867 retirement funds in the country.
She said the authority has extended the deadline for receiving amendments to the end of July and cautioned against the submission of fund amendments after the new expiry date, saying any late submissions would abide by the “normal service level commitments”.
“You can’t expect to come mid- or end-August and say ‘Please register our rule amendments’, and that is going to mean that your funds aren’t going to be ready for the two-pot implementation,” Camroodien said.
The bill was passed by both the National Assembly and the National Council of Provinces in May this year, with President Ramaphosa signing into law the Revenue Laws Amendment bill at the beginning of June.
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