Big retirement fund changes in South Africa

The South African National Treasury and the South African Revenue Service (SARS) have published a draft of the 2025 Revenue Laws Amendment Bill (RLAB).

This bill proposes changes to the nation’s two-pot retirement system and aims to clarify confusion around certain aspects of the system.

The two-pot system, introduced in September 2024, allows retirement fund members to access a portion of their savings before retirement. It divides retirement funds into two parts:

• Savings component: This portion is accessible for withdrawals annually.
• Retirement component: This portion remains untouched until the individual reaches retirement age.

According to National Treasury, one of the complexities of the system lies in the “seeding amount,” a one-time transfer of funds from the existing retirement pot into the new “savings” component.

Under the two-pot system, anyone over 55 on 1 March 2021, who belonged to a provident or provident preservation fund, could choose to add to a “savings pot” by 1 September 2024. They were also required to stay in the same fund.

If one fits in this category and opted in, they would receive a one-time seeding amount of 10% of accumulated funds (the vested component). The seeding amount was to be calculated on 31 August 2023 and capped at R30,000.

However, the National Treasury and SARS say some retirement funds used various seeding dates, leading to confusion and inconsistency.

“This has created an anomaly for funds as two versions have been communicated to their members and incorporated into the fund’s rules,” an explanatory note from the National Treasury says.

For some members the seeding calculation was done on 31 August 2024, and for others, the seeding amount was calculated on the last day of the month the member elected to opt in.

The proposed amendments seek to address discrepancies that emerged between the original legislation and the rules adopted by individual retirement funds.

To resolve this, the draft bill offers greater flexibility.

Funds can now calculate the seeding amount based on the member’s vested component on any of the following dates.

• August 31, 2024;
• The last day of the month the member opted into the two-pot system; or
• A date specified in the fund’s own rules.

This adjustment is expected to align the legislation with existing practices and ensure a smoother implementation of the two-pot system.

The draft bill also reiterates the existing rules for exclusion from the two-pot system.

• Members of provident funds are automatically excluded if they were 55 years or older on March 1, 2021, and have remained with the same fund.
• Members of provident preservation funds are excluded if they were 55 or older on the same date.

The deadline for public comment on the draft bill is January 17, 2025. The Minister of Finance will present the bill during the 2025 Budget Review, and if approved, the amendments will be applied retroactively from September 1, 2024.

The draft RLAB can be found below:

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