President Cyril Ramaphosa has assented to the Pension Funds Amendment Bill which amends pension-related legislation 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.
Government has proposed a reform to the retirement saving regime, which will see the introduction of the “two-pot” retirement system. From the proposed date of 1 September 2024, one-third of retirement contributions will be split into a savings component and two-thirds into a retirement component.
What is in the “savings component” will be available for withdrawal at any time before retirement. The ability to unconditionally access amounts from the “savings component” will be provided without the member having to cease employment or having to resign. A member will be allowed to make a single withdrawal within a year of assessment.
The minimum withdrawal amount is R2 000. The ability to withdraw from the “savings component” will be applicable on a per fund or per contract basis.
Withdrawals from the “savings component” will be added to the individual’s taxable income and will be taxed at their marginal tax rates.
Retirement funds will on or soon after 1 September 2024, be required to create another component known as the “retirement component”, which will be housed within the current retirement fund.
Individuals will be required to contribute an amount of two-thirds of the total individual retirement fund contributions to the “retirement component”.
The assets in the “retirement component” will be required to be preserved until retirement (i.e. withdrawals from this component can only be accessed by the member upon retirement as per the fund rules).
Once a member has reached retirement age and retires, the “retirement component” is to be paid in the form of an annuity (including a living annuity).
This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds.
Distributed by APO Group on behalf of The Presidency of the Republic of South Africa.