2-Pots Update: Treasury publishes Draft Revenue Laws Second Amendment Bill, 2024
11 Mar, 2024

Lize de la Harpe – Senior Legal Advisor at Sanlam

 

 

Introduction

 

 

On 20 February 2024 National Assembly passed the Revenue Laws Amendment Bill, 2023 (“the RLAB”). The RLAB, which establishes the Two-pot system, has since been transmitted to the National Council of Provinces (Select Committee on Finance) for concurrence.

 

Despite the changes made to the RLAB in 2023 to enhance the Two-pot system, it became apparent that further adjustments were necessary to clarify the existing language.

 

National Treasury consequently published the draft Revenue Laws Second Amendment Bill (“the Bill”) on 21 February 2024. The Bill aims to make technical corrections to the RLAB.

 

 

The proposed changes

 

 

The Bill proposes the following:

 

  1. Drafting changes to enhance clarity;
  2. The amendment of the definitions of the three components to explicitly exclude maintenance awards that are taxed under section 7(11) of the Income Tax Act;
  3. The removal of the requirement to obtain a directive when transferring the seeding amount from the “vested component” to the “savings component”; and
  4. That reallocations of amounts between the three components are not treated as transfers and that the requirement to obtain a directive for reallocations between the three components be withdrawn.

 

The deadline for public comment on the Bill is 31 March 2024.

 

 

Where to from here?

 

 

The successful implementation of the Two-pot system remains dependent on the finalisation of the Pension Funds Amendment Bill, 2024 which was tabled in Parliament on 30 January 2024.

 

The purpose of the Pension Funds Amendment Bill is to amend the Pension Funds Act, 1956 by inserting certain definitions to make provision for the implementation of the Two-pot system as established in the RLAB.

 

The Public hearings on the Pension Funds Amendment Bill are set to take place on 12 March 2024. Treasury has indicated its intention to have the Pension Funds Amendment Bill finalised by the end of March 2024.

 

 

Conclusion

 

 

Funds will need to ensure that its rules are amended and timeously approved by the Financial Sector Conduct Authority (“FSCA”) for implementation of the Two-pot system by 1 September 2024. In this regard, the FSCA on 16 February 2024 published a set of requirements regarding these rule amendments (Communication 3 of 2024). This communication also sets out the approach that the FSCA will be taking to applications for such amendments.

 

ENDS

 

 

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@Lize de la Harpe
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