By Lehlohonolo Lehana.
The finance portfolio committee in parliament has voted to implement the so-called two-pot retirement system on 1 March 2024 instead of 1 March 2025.
National Treasury decided a month ago to delay the implementation of the system as many financial service providers expressed concern that their systems would not be ready by March 2024.
Parliament’s standing committee on finance agreed to introduce the two-pot pension system from March 1, committee chair Joseph Maswanganyi said in Cape Town on Tuesday. It will allow individuals to contribute one-third of their savings into an account that can be accessible at any time, while two-thirds must only become available at retirement.
The two-pot retirement system will allow consumers to draw some of their retirement savings before they retire to fund unexpected expenses instead of turning to expensive debt alternatives. Two thirds of contributions will go to a retirement pot that will only be accessible after normal retirement age, while the remaining one-third will go into a savings pot, allowing immediate access under certain conditions.
“Old Mutual supports the extended deadline after National Treasury and SARS provided feedback at the standing committee on finance yesterday as part of the parliamentary process. The proposed implementation date for 1 March 2024 would not have been achievable as the legislation has not yet been finalised, “Michelle Acton, retirement reform executive at Old Mutual, said after the decision.
“This extension is important because it will provide an invaluable opportunity to ensure that the new system can seamlessly process the anticipated surge in applications for access to pension savings.”
National Treasury also announced at the end of October that while the seeding would remain fixed at 10%, the withdrawal cap would be increased from R25 000 to R30 000.
Richard Carter, head of assurance at Allan Gray, says he is concerned about what this means for the industry and investors and that there are significant risks to rushing the legislation needed for the system to operate.
“We are surprised by today’s vote in favour of bringing the two-pot implementation to less than four months from now. This is a tough ask as most retirement funds and their administrators will simply not be ready in time.
“Given that consultations on the detail are still in progress and that regulation is still being finalised, we believe that moving it forward is premature. 2025 is a more sensible timeline as it gives everyone time to accommodate the changes.”
The extended period should offer us all an opportunity for constructive engagement with all stakeholders to refine the implementation plan and address potential challenges,” said the CEO of Momentum Corporate, Dumo Mbethe.