Lize de la Harpe, Senior Legal Advisor, Sanlam Corporate
The Office of the Pension Funds Adjudicator (PFA) published its latest communication last week which specifically deals with complaints relating to the two-pot system coming into effect on 1 September 2024.
The Pension Laws Amendment Act, 2024
The Pension Laws Amendment Act, 2024 amended the Pension Funds Act, 1956 to make provision for the implementation of the 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 (as at 31 August 2024) will form the vested component – the current retirement rules will continue apply to this component. No further contributions can be made to the vested component after 1 September 2024, except for members of provident (preservation) funds who were 55 years or older on 1 March 2021 and remained members of the same fund.
A once off amount of 10% of the value of the vested component, up to a maximum of R30 000, will be allocated to the savings component (seeding capital) to make provision for immediate access.
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. Members will not be allowed to access the contributions to the retirement component prior to retirement.
Office of the PFA
The PFA is a statutory body established in terms of the Pension Funds Act to deal with complaints lodged in terms of this act.
The PFA is a creature of statute – it has no inherent jurisdiction. Its jurisdiction is limited to “complaints” as defined in section 1 of the act.
A “complaint” is defined as relating to the administration of a fund, the investment of its funds and the interpretation of its rules alleging that:
- A decision of the fund or any person taken in terms of the fund rules was ultra vires (in excess of the powers the fund or person had) or an improper exercise of its powers
- The complainant has or may sustain prejudice in consequence of the maladministration of the fund
- A dispute of fact or law has arisen between the fund or any person and the complainant, or
- That an employer who participates in the fund has not fulfilled its duties in terms of the rules of the fund.
Put simply: a complaint must deal with at least one of the following three issues:
- The administration of the fund; and/or
- The investments of the fund’s assets; and/or
- The interpretation of the rules of the fund.
PFA Communication 2 of 2024
The PFA indicated that it expects several queries and complaints relating to withdrawals of the once off seeding capital from 1 September. The nature of these complaints remain to be seen once the fund rules are amended to cater for this and the withdrawal claims start coming in.
The PFA reiterated that its role in any complaint relating to the two-pot system is to apply the fund rules and to ensure that the funds comply with their administrative processes in this regard. Accordingly, if a fund does not amend their rules to make provision for this new regime, the PFA will not be able to grant relief in this regard.
The PFA advised funds and administrators to ensure that it communicates to members to inform them of these amendments, the benefit entitlements, how to access their benefits and the impact of the two-pot system in general.
In addition, the PFA encouraged members and funds to resolve these types of complaints early on by sharing information on turnaround times for accessing benefits as well as any challenges the fund is experiencing in implementing the two-pot system changes. Members should also be informed if there is non-payment of contributions by employers as this may impact their access to the savings component.
Conclusion
The PFA has indicated that it will monitor complaints relating to two-pot and engage with stakeholders to deal with emerging trends.
ENDS
