Two-pot retirement system to start on 1 September 2024

The two-pot retirement system will now only be implemented on 1 September 2024 and not on 1 March next year, according to an agreement between the minister of finance and the portfolio committee on finance in parliament.

The system will divide members’ contributions into two clear categories: two-thirds will go towards mandatory retirement savings, while one-third will be designated for a savings pot, offering the option of annual withdrawals to help with unforeseen financial challenges. 

Government initially said in 2022 that the implementation date would be 1 March 2024. However, in the lead-up to this year’s Medium Term Budget Policy Statement in October, National Treasury signalled a postponement of the implementation date to March 2025 to give the industry and South African Revenue Service (Sars) the opportunity to prepare their systems.

However, the portfolio committee voted recently to move implementation back to 1 March 2024. The industry then expressed its concerns that it would not be ready, but consumers who have been waiting eagerly to access a part of their pension savings were happy that they would not have to wait so much longer.

Yesterday, a letter from finance minister Enoch Godongwana was read in parliament that the finance committee approves the implementation of the two-pot retirement system to be postponed to allow all stakeholders to get their systems in place.

“To enable withdraws from the savings component at the date of implementation, funds must apply for the correct tax rate for the withholding tax. This would be done through a directive form the Sars. Sars indicated that it needs at least six months after promulgation of legislation to put such a system in place,” Godongwana said in the letter.

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Industry welcomes the new date for the two-pot retirement system

Michelle Acton, retirement reform executive at Old Mutual welcomed Treasury’s announcement that it would move the implementation date to 1 September 2024, which is in the best interest of all stakeholders.

“This new timeline offers a balanced window for all involved parties to prepare adequately. We appreciate government’s attentiveness to the industry’s feedback and commitment to ensure a seamless transition for the two-pot retirement system.”

She emphasised that the decision allowed Old Mutual, alongside essential partners like Sars, sufficient time to complete necessary system builds and procedural updates.

Acton said this was particularly crucial for facilitating early withdrawal claims under the new system, a process dependent on finalising and gazetting the Draft Revenue Laws Amendment Bill and the Pension Funds Amendment Bill.

In addition, she underlined that from the time the laws were gazetted, retirement funds would need at least six months to finalise building the new system and structures required to facilitate withdrawals for members.

She said collaborative efforts in this period is very important.

“This extended timeframe is a testament to our collective dedication to delivering a well-prepared and efficient system. It ensures we can provide the best service to South Africans who rely on these funds.”