By Lehlohonolo Lehana.
President Cyril Ramaphosa has signed the Pension Funds Amendment Bill into law, to enable the implementation of the recently legislated two-pot retirement system geared towards bolstering retirement savings.
The new Pension Funds Amendment Act 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.
The law provides for the introduction of the savings withdrawal benefit; the appropriate account of a member’s interest in the savings; retirement and vested components, and the deductions that may be made.
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 2024.
This law complements the Revenues Laws Amendment Act, 2024 (Act No. 12 of 2024), which was signed by the President on 11 June 2024.
This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds,” the Presidency said in a press statement.
The two-pot system consists of the first pot, known as the savings pot, and the second, known as the retirement pot.
A member will be allowed to make a single withdrawal from the savings pot within a ‘year of assessment’ with the minimum withdrawal amount of R2 000, but withdrawals will be taxed at marginal tax rates.
Once a member has reached retirement age and subsequently retires, the ‘retirement component’ is to be paid in the form of an annuity, which will include a living annuity.
Meanwhile, the Financial Sector Conduct Authority (FSCA) has launched a retirement funds Know Your Rights campaign to educate the public about the two-pot retirement system.
The Know Your Rights campaign will explain how the two-pot system works and the impact it will have on a fund member’s retirement benefits.
It will run until 30 September 2024.
“Besides the introduction of the two-pot retirement system, the campaign will also focus on other aspects of retirement funds, such as consumer rights, how retirement fund contributions work, and the recourse available to consumers when employers fail to make contributions, “said the FSCA.