Although the president signed many other Bills, such as the NHI Bill, into law before the end of his presidency and even signed the Cannabis for Private Purposes Bill on the night before the election, he did not, as expected, sign the Pension Funds Amendment Bill, that makes provision for the two-pot retirement system, into law.
Only three months are left before the two-pot retirement system comes into effect on 1 September. The industry already pointed out when the date was confirmed that they might be ready for implementation.
The Pension Funds Bill must now wait for the new president to sign it into law. This position will only be filled in two weeks. The question is whether the industry and other state organs such as the Financial Sector Conduct Authority (FSCA) and Sars will be ready.
However, Michelle Acton, retirement reform executive at Old Mutual, says as long as the Pension Funds Amendment Bill is signed before 1 September, the law will be in place for 1 September. “This will mean that administrators must focus on getting ready as it is very clear the effective date will be 1 September.”
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The two-pot retirement system is a reform that will allow retirement fund members to make partial withdrawals from their retirement funds before retirement, while preserving a portion that can only be accessed at retirement to help improve retirement outcomes, according to National Treasury.
Thus, members will not have to resign to access part of their retirement benefit if they are in financial distress.
The two-pot retirement system will apply to all retirement funds in the private sector as well as the public sector, except for the old generation or legacy retirement annuity policies, or funds with no active participating members, such as funds in liquidation, beneficiary funds, closed funds or dormant funds.
Pensioners and members of provident funds who were 55 years and older on 1 March 2021 who have not opted to be part of the two-pot retirement system will also be excluded.
The reform creates a savings component, a retirement component and a vested component. Only the savings component and retirement component can receive retirement contributions from 1 September, while the vested component will house retirement benefits accumulated before 1 September 2024. Investment growth will still be credited to this component, National Treasury says.
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From 1 September retirement contributions will be split into a savings component (or pot) and a retirement component. A third of total contributions will go into the savings component and two thirds of total contributions into the retirement component.
Withdrawals will have to be for a minimum of R2 000 and can only be done once a year. There is no maximum for withdrawals. Amounts in the account will still be available for withdrawal in future years and benefit from tax-free growth until a withdrawal is made.
The retirement component, on the other hand, cannot be accessed on resignation and may only be accessed at retirement. National Treasury says retrenchment cases will be dealt with in another phase of the reform process.
The retirement value accumulated by 31 August 2024, referred to as the “vested component”, will not take further contributions. However, it will remain invested by the retirement fund. Should you resign in future, your current right (vested right) to access this component or have it transferred to a preservation fund is maintained.
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National Treasury has this advice for people about using the two-pot retirement system:
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