Lize de la Harpe, Senior Legal Advisor at Sanlam Corporate

Introduction

In terms of the Two-Pot System that came into effect on 1 September 2024, all retirement fund members are allowed to make one withdrawal per tax year from their savings component, subject to prescribed minimums. Existing fund members had immediate access to a starting balance in their savings component, which was calculated as a percentage of their accumulated fund credit as at 31 August 2024 (their vested component) subject to a cap.

By 11 September 2024, the South African Revenue Service (SARS) had received 161,607 tax directive applications totalling R4.1 billion (gross). The FSCA soon picked up some concerns regarding the differences in fees being charged by fund administrators for withdrawals from the savings component.

Identifying the need to assess the impact of these fees and charges so as to gain a better understanding of the structure thereof, the FSCA published an Information Request 2 of 2024 (RF) on 13 September 2024.

In terms of the Information Request fund administrators were asked to provide information detailing, among other things, the:

• Estimated costs incurred to administer the Two-Pot system, including systems changes and the like,
• Estimated set up costs, including number of members under administration, and
• Details of transactional fees as well as increases in administration fees, including how these costs will be apportioned and recouped

Fund administrators had until 30 September 2024 to respond.

Presenting at the Pension Lawyers Association Annual conference held on 8 and 9 April 2025, the FSCA confirmed that – based on its findings – it had come to the conclusion that a broader and more in-depth review of costs and fees is required, which will involve an external, independent consultant.

FSCA Regulatory Strategy for 2025 – 2028

The FSCA published its Regulatory Strategy for 2025 – 2028 on 6 May 2025 which outlines its strategic direction for the next three years. Recognising the importance of protecting financial customers and strengthening the integrity and resilience of the financial system, the FSCA has undertaken to continue its work in addressing concerns around high savings withdrawal transaction fees.

The document specifically refers to the Information request published last year and explains that the information received will be analysed to identify trends, anomalies, and areas of concern. To ensure that fee structures are transparent, reasonable, and do not erode the value of member benefits, the FSCA intends to use the insights gained from this process to inform future regulatory and supervisory interventions.

Conclusion

The object of the board of trustees as set out in section 7C of the Pension Funds Act, 1956 is to direct, control and oversee the operations of the fund in accordance with the applicable law and the rules of the fund.

The board must therefore take all reasonable steps to ensure that it acts in the best interest of the fund and its members – which includes ensuring that reasonable fees are charged for, among others, withdrawals from the savings component in terms of the Two-Pot System.

ENDS