Lerato Mbhiza
The National Assembly has approved the Pension Funds Amendment Bill without encountering any objections.
The Bill aims to amend the 1956 Pension Funds Act to introduce a savings withdrawal benefit. Together with the already passed Revenue Laws Amendment Bill, it will establish the so-called two-pot system.
Under this system, members of pension and retirement funds will be able to access one-third of their retirement funds from their savings pot.
The Pension Funds Amendment Bill will, from September, require that funds be divided into three components or “pots” split between savings, retirement and a vested portion. It will also allow members to transfer or withdraw savings in the event they change or lose their job. Fund members can choose if they want to opt into the new system.
“In times of dire financial distress, members of pension or provident funds tend to terminate their employment in order to access their retirement savings,” Deputy Finance Minister David Masondo told lawmakers in Cape Town.
While opposition parties have raised concerns about the impact of regular withdrawals from pension fund savings, and that workers could retire poor, the DA and the ACDP said if the economy performed better, the taxation rate on these withdrawals could be lower.
The EFF said workers should not be struggling to the extent that they are driven to tapping into their pension funds, while the FF+ said workers should rather be encouraged to save for their retirement.
However, Masondo said the option should be exercised only in times of dire financial stress.
“This is in the interest of economic growth because the economy can only grow if you’ve got savings. Money capital comes from savings, which we utilise to deploy in the economy in order to grow the economy.”
The Bill will now be sent to the National Council of Provinces for concurrence.
Two-Pot Retirement System explained:
In the course of the debate, Joe Maswanganyi, Chairperson of the Standing Committee on Finance, outlined the objectives of the Bill and its potential advantages for workers who are members of the fund.
“The Bill amends the Pensions Fund Act of 1956, the Post and Telecommunications Related Matters Act of 1958, the Transnet Act of 1990 and the Government Employees Pension Laws 1996, to insert certain definitions to introduce the savings withdrawal benefits, establish the appropriate account for a member’s interest in the savings, retirement invested components, and allow for deductions that may be made…”
“These amendments were not included in the Revenue Laws Amendment Bill that was already passed by the National Assembly in February 2024. The proposed two-port retirement system, as presented by the Deputy Minister, addresses primary concerns of the workers. The system will provide relief to workers in both the public and private sectors,” Maswanganyi affirmed.
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