Nathalie Burrows, Editor of EBnet

The 2025 Budget didn’t have any earth shattering announcements as far as retirement funds are concerned, but there were a couple of relevant comments that I thought I’d share.

Firstly, and I think something that we’ve all been talking about and certainly raised through formal industry channels, is the compulsory preservation aspect of the retirement pot under the two-pot system and its consequence for retirement fund members who may be retrenched. In the full Budget document, Government acknowledged the industry’s requests for a reconsideration of the retrenchment scenario and confirmed that this will be dealt with in phase 2 of two-pot – noting that the restructuring required for this is quite complex. Mention was made that strict requirements will be applied – almost like a “means test” to ascertain whether the member is in financial distress.

In terms of progress of the Conduct of Financial Institutions (COFI) Bill, it was confirmed that the final draft of the bill is awaiting certification from the Office of the Chief State Law Adviser, whereafter it will be submitted to Cabinet for approval to be tabled in Parliament.  The FSCA is preparing for the bill’s implementation, as will be explained in more detail in its 2025 3-year Regulation Plan. We know that this implementation will unfold in phases, as this is a big overhaul involving many moving parts.

In 2025, the FSCA in collaboration with the Prudential Authority will publish a market study on the adoption and use of AI in South Africa’s financial sector. The intention of this research is to ensure that AI is used ethically, responsibly and effectively while safeguarding the integrity and soundness of the financial sector. This is something that will be of interest to many of the investment and advice professionals in our community.

When it comes to unclaimed assets, National Treasury and the FSCA will continue their work with industry to develop the recommendations around managing unclaimed assets and the establishment of a central unclaimed assets fund.

The commentary on progress made to move us closer to removal from the FATF’s grey list was encouraging. Two (of the original 22) action items remain – both around demonstrating a sustained increase in the investigation and prosecution of complex money laundering and terror financing. South Africa is working to address both outstanding action items by June 2025, to exit grey listing by October 2025.

Then, there is a slight untidy under the two-pot system when it comes to the tax payable on death benefits paid from retirement funds. Under the Revenue Laws Second Amendment Act (2024), a lump sum payable on the death of a member is still a retirement fund lump sum benefit. But the two-pot legislation only makes provision for the treatment of the remaining balance in the savings pot on retirement and not on death – meaning that any value in the deceased member’s savings pot is only payable as a savings withdrawal benefit. It is proposed that changes be made to ensure that any lump sum benefit chosen by the nominees or dependants be considered part of the retirement fund lump sum benefit for Income Tax Act purposes.

The increased commitment to infrastructure spending and the relaxation of some of the technical requirements around public-private partnerships, I think is a good thing for retirement funds and hopefully we’ll see more and more real opportunities being brought forward.

There was some good news for individuals – no changes to the personal tax rates, fuel levies, sugar tax etc – but there is no doubt that the VAT increase and no inflationary adjustments to the income tax brackets (for the second consecutive year) will have implications for South African households and their ability to save for retirement.

I’m sure this conversation will unfold over the coming weeks.

ENDS