Good news for pensions in South Africa

 ·6 Dec 2023

Asset managers in South Africa have welcomed the decision to move the implementation date of the new Two-Pot retirement system to 1 September 2024.

The new retirement system will feature a “savings pot” – which will receive a maximum of one-third of all funds and be accessible prior to retirement – and a “retirement pot”, which will only be accessible at retirement and require a minimum of two-thirds of all fund contributions.

The new system was initially set to launch on 1 March 2024, but National Treasury recommended that it be postponed to 1 March 2025 to allow the asset management industry more time to update their systems.

However, the Standing Committee on Finance rejected National Treasury’s recommendation, with the implementation date still set for 1 March 2024.

Finance Minister Enoch Godongwana then wrote to the committee with a compromise – moving the implementation date to 1 September 2024.

Godongwana said that the extended time would allow for the necessary legislation to be passed and give stakeholders enough time to update their systems effectively. The committee then accepted his proposal, delaying implementation by six months.

“This new timeline offers a balanced window for all involved parties to prepare adequately. We appreciate the government’s attentiveness to the industry’s feedback and commitment to ensuring a seamless transition for the Two-Pot Retirement System,” said Michelle Acton from Old Mutual.

Acton said that the delay will allow Old Mutual and other stakeholders, such as SARS, enough time to complete the necessary system builds and procedural updates.

She said this is essential for facilitating early withdrawal claims under the new system, which is dependent on finalising the Draft Revenue Laws Amendment Bill and the Pension Funds Amendment Bill.

Retirement funds will need at least six months to finalise the builds of their new systems and structures required to facilitate withdrawals from members once the laws are gazetted, she added.

“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.”

Richard Carter from Allan Gray also said that the new implementation date is a reasonable compromise.

“Although still tight, the additional six months will give retirement funds and their administrators more time to prepare for and accommodate the changes while at the same time not overly delaying access to funds for members in desperate need,” Carter said.

“We now await the legislation, which we hope will be finalised sooner rather than later, so that everyone can be clear on exactly what changes are required and get going on implementing these.”

Read: The tide is turning in South Africa

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