Green light for emergency funds: Ramaphosa signs two-pot retirement system into law

President Cyril Ramaphosa has signed into law the Revenue Laws Amendment Bill of 2023 which introduces the two-pot retirement system from 1 September 2024.

The primary objective of the two-pot retirement system is to provide flexibility for fund members to access their retirement savings during emergencies, without necessitating resignation.

“While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households, the new retirement system offers protection and dignity to those who need it the most to overcome financial stress,” Ramaphosa said in a statement released on Saturday.

What is the two-pot retirement system?

Traditional retirement systems primarily focus on long-term savings, often lacking the adaptability to address immediate financial crises.

The reform introduced by the much-anticipated legislation will come into effect from 1 September 2024.

Retirement fund members would then be able to make partial withdrawals from their funds before retirement, while preserving a portion that can only be accessed at retirement to help improve retirement outcomes, according to the National Treasury.

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. The vested component will house retirement benefits accumulated before 1 September 2024.

National Treasure noted that investment growth will still be credited to this component.

Which retirement funds qualify?

The Citizen previously reported that the two-pot retirement system will apply to all retirement funds in the private, as well as public sector, except for the old-generation or legacy retirement annuity policies.

Funds with no active participating members, such as funds in liquidation, beneficiary funds, closed funds or dormant funds, will also be excluded.

Pensioners and members of provident funds who were 55 years and older on 1 March 2021 and who have not opted to be part of the two-pot retirement system, will also be excluded.

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