Two-pot retirement system: Treasury, MPs agree on new implementation date

Fin24 reports that Treasury and Parliament’s Standing Committee on Finance have reached a compromise on the implementation of the so-called two-pot retirement system, with a new proposed starting date of 1 September 2024. The two-pot system would allow people to access a third of their pension savings before retirement. While a date of March 2024 was initially proposed, Treasury subsequently pushed it forward to March 2025. However, MPs were unhappy and subsequently appealed to Finance Minister Enoch Godongwana last month, asking for the earlier date to be implemented.

The new date was proposed in a letter by Godongwana that was read out to the committee on Monday. Godongwana highlighted several concerns about the March 2024 implementation date, including the tabling of key legislation and the amendment of retirement fund rules. Godongwana said in his letter that the Pension Funds Amendment (PFA) Bill, that allows for the amendment of retirement rules, is yet to be tabled before Parliament. The bill would need to be tabled before the implementation date of the Revenue Laws Amendment Bill (RLAB), and the implementation of the two-pot retirement system. 

The minister also highlighted that fund rules would also need to be amended and submitted to the Financial Sector Conduct Authority (FSCA) for registration, before the implementation of the retirement system. “While the FSCA can have their internal systems ready to receive fund rule amendments from 1 March 2024, it will take approximately three months from receipt of draft rules for approvals to be finalised,” he said in the letter. “There are 1 324 retirement funds [that] will all be required to submit amended rules for registration and approval.”

He added: I recognise that a delay is frustrating to both retirement fund members, who expected that they would have access to a portion of their retirement fund savings by 1 March 2024, as well as to members of the Standing Committee on Finance, who have debated this issue over the past two years. However, the concerns I have raised indicate that it is highly unlikely that we will be able to achieve a smooth implementation in restructuring the retirement system by 1 March 2024. The committee voted in favour of the new date. 

Committee chair Joseph Maswanganyi told News24 the matter had been referred to National Assembly and will be tabled for a potential debate on Wednesday. Maswanganyi, however, emphasised the final decision on the implementation date is yet to be completed. “The committee does not have decision-making powers [for the implementation of the two-port retirement system]. The matter was requested for debate on Wednesday,” he said. South Africans are currently able to withdraw their full pension savings, subject to taxation, when they leave a job, though this means that many people enter retirement with little to no capital once they reach retirement age.

Through the new system, people will be allowed to access a portion of their retirement fund, available through a “savings component”. One-third of retirement contributions will be allocated for the “savings component”, while two-thirds of the contribution will be allocated for the “retirement component” will have to be used to purchase an annuity upon retirement.

by Ahmed Areff and Na’ilah Ebrahim


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