Lize de la Harpe – Senior Legal Advisor at Sanlam

 

 

The National Assembly has, during its plenary sitting held yesterday 20 February 2024, passed several bills, including the Revenue Laws Amendment Bill (“the RLAB”). The RLAB makes provision for the introduction of the two-pot system with effect from 1 September 2024.

 

 

Two-pot system

 

 

In a nutshell, as of 1 September 2024 all funds will consist of three components, being (1) a vested component, (2) a retirement component and (3) a savings component.

 

 

The accumulated retirement benefit (before 1 September 2024) will form the vested component – the current retirement regime will continue to apply to this component. No further contributions can be made to the vested component after the effective date of these changes, except for members of provident and provident preservation funds who were 55 years or older on 1 March 2021, and remain members of the same fund they were members of on 1 March 2021.

 

 

All contributions made on or after 1 September 2024 will be split as follows – one third to the savings component with the remaining two thirds to the retirement component.

 

 

Members will be allowed to make one withdrawal per tax year from the savings component (subject to prescribed minimums). Contributions to the retirement component cannot be accessed prior to retirement.

 

 

The implementation date

 

 

The implementation date of the two-pot system was initially 1 March 2024.  Following concerns raised by the retirement fund industry, a revised bill was published on 1 November 2023 which proposed the postponement of the two-pot system implementation to 1 March 2025.

 

 

However, when the revised bill was read in Parliament, the chairperson of the Standing Committee on Finance (“the SCOF”) queried the new implementation date. Despite Chris Axelson’s (Acting Head: Tax and Financial Sector Policy) explanation of the need for this postponement, the MPs remained unconvinced, and it was agreed by the committee that the implementation date must remain 1 March 2024.

 

 

The Minister of Finance subsequently proposed a date of 1 September 2024, which compromise was accepted by the SCoF.

 

 

The Pension Funds Amendment Billl

 

 

The timely and successful implementation of the two-pot system remains contingent upon the finalisation of the Pension Funds Amendment Bill.

 

 

The Pension Funds Amendment Billl was published on 30 January 2024. This bill provides for certain amendments to the Pension Funds Act, 1956 which are necessary to enable retirement funds to appropriately implement the amendments to the Income Tax Act, 1962 which are contained in the RLAB. The Public hearings on the bill are set to take place on 12 March 2024.

 

 

ENDS