The Pension Funds Amendment Bill, which modifies pension-related laws to facilitate the implementation of the newly enacted two-pot retirement system aimed at enhancing retirement savings, has been approved by President Cyril Ramaphosa.
The Government Employees Pension Law of 1996, the Transnet Pension Fund Act of 1990, the Post and Telecommunications-Related Matters Act of 1958, and the Pension Funds Act of 1956 are all amended by the new Pension Funds Amendment Act.
The law establishes the retirement and vested components, the introduction of the savings withdrawal benefit, the proper accounting of a member’s interest in the savings, and the permitted deductions.
According to the Act, pension funds must modify their investment portfolios, update their policies, and set up administrative frameworks so that members can request to obtain a portion of their pension assets starting on September 1, 2024.
The Revenues Laws Amendment Act, 2024 (Act No. 12 of 2024), which was signed into law by the President on June 11, 2024, is complemented by this statute.
The “two-pot” retirement scheme will be implemented as part of the government’s proposed reform of the retirement savings regime.
According to the Presidency, starting on the suggested date of September 1, 2024, one-third of retirement payments will go toward savings and the other two-thirds toward retirement.
Before retiring, the money in the savings component can be taken out whenever you like. The member will not need to quit or give up their job in order to have unrestricted access to funds from the savings component.
After one year of assessment, a member may make one withdrawal, with a minimum withdrawal of R2,000. According to the Presidency, the option to withdraw from the savings component will be available per fund or per contract.
The savings component withdrawals will be taxed at the individual’s marginal tax rate and added to their taxable income.
The Presidency further clarified that retirement funds will have to establish a new component, called the retirement component, which will be kept within the current retirement fund, on or shortly after September 1, 2024.
Two-thirds of the total contributions made to individual retirement funds must be contributed by each individual to the retirement component.
The retirement component’s assets must be kept intact until retirement; withdrawals from this component are only available to members upon their retirement, in accordance with fund regulations.
The retirement component, comprising a living annuity, shall be paid to the member upon retirement and upon reaching retirement age. According to the President, “this dispensation allows members of retirement funds to access retirement savings without having to resign or cash out their entire pension fund.”
