Leanne van Wyk, Director, ICTS Legal Services (Pty) Ltd
Parliament’s Standing Committee on Finance (SCOF) shushed Treasury’s concerns, deciding not to support the proposal to move the two-pot implementation date from 1 March 2024 to 1 March 2025. This even though Treasury performed the consultation and research and clearly understands the risks.
Is this about doing the best for members desperate for cash and not saving enough? Or maybe they just don’t believe Treasury or the industry when they say they are not going to be ready. Given the weight of evidence that many are not ready for this legislation, it is more likely that this is about votes in an election year.
The SCOF approach is likely to hurt the people this legislation should benefit – members
If administrator’s system and processes are not ready, this will negatively impact on the administration of members’ benefits. That will lead to increased audit, forensic, record reconstruction, legal, labour, litigation and many other costs. It will lead to delays in paying money out of funds. Communication to members will be concertinaed, leading to confusion, wrong decisions and loss. There will also be a knock-on to employers, who will have to deal with employee ire.
The legislation is not yet finalised. How can a fund’s administrator conclude development and test systems before they can even finalise the specifications? Going into the two-pot system with untested systems flies in the face of due care and diligence. If Government wanted the industry to be ready on 1 March 2024 – it should have finalised the legislation 18 months ago.
Even small hiccups, let alone large failures, could negatively impact confidence in the retirement fund industry and, thus, our fledgling, vulnerable savings culture. Government is shifting risk from itself to every part of the retirement funds industry – including funds and their members by bludgeoning through an irresponsible implementation date.
Even if administrators, funds and others find a way to get ready in time, this will be at a greater cost in an environment where funds are fighting a battle to keep costs down in an increasingly complex environment. Members will bear this cost in the end.
I hope we see a braver decision at the National Assembly. Otherwise, rabbit meet hat…