Delay in retirement fund amendments could impact two-pot system rollout, warns FSCA

The Financial Sector Conduct Authority (FSCA) is still waiting for more than 350 retirement funds to submit their respective rule amendments that will allow them to implement the two-pot retirement system.

This is according to Zareena Camroodien, head of fund governance and trustee conduct at the FSCA.

Speaking at a media briefing hosted by insurer Liberty, she said the FSCA must consider, approve, and register the amendments of every single fund before the respective fund is allowed to consider claims from their members who want to access money from their savings pots from September.

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There are currently 867 active retirement funds in South Africa, and the authority has so far received the rule amendments of 500 funds.

The much-talked-about two-pot system comes into effect at the beginning of September, allowing members of retirement funds access to one third of their pension while two thirds will be preserved for retirement.

The significant reforms have been preceded by extensive planning, including the design and implementation of new systems by pension fund administrators to enable a transition to the two-pot system.

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Camroodien says the FSCA had requested funds to submit their rule amendments by no later than Monday, 15 July, but has extended the deadline to 31 July.

She cautions that any fund that tries to submit its fund amendments after the new expiry date will have to abide by the “normal service level commitments”.

“You can’t expect to come mid-August 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.”

Besides concern over the rule amendment submissions, the industry is also waiting in anticipation for President Cyril Ramaphosa to sign the Pension Funds Amendment Bill into law.

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The bill was passed by both houses of parliament on 16 May and is now on the president’s desk for ratification.

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On 1 June, the president signed the other crucial piece of legislation – the Revenue Laws Amendment Bill – into law, which is also a prerequisite for the two-pot system to take effect.

Chantel Manson, chief specialist of legal advocacy at Liberty, says the signing of the Pension Funds Reform Bill will be a critical milestone because then the FSCA can start registering the various funds’ rule amendments.

“We need that enactment, and the promulgation before registering can take place,” says Camroodien, “but funds should definitely submit their amendments in the meantime so that the FSCA can give ‘in principle’ approval.”

This article was republished from Moneyweb. Read the original here