Leanne van Wyk, Head of Legal and Compliance, Sygnia
We are 10 days in and holding the baby!
Administrators are inundated, systems, apps and portals are mostly holding up, with some glitches and improvements being made on the run. While two pot is still a squalling infant, I am proud of our industry. With imperfect information, we have done everything we can in the very short time allowed. It feels like organised chaos. Hold thumbs, I hope I didn’t jinx it 😊
Has the communication been effective?
For the first time in a long time, members actually want to talk to their retirement funds and pitch up quite enthusiastically for communication sessions. Communication about two-pot has been prolific, determined, thoughtful, multi-channelled, across languages and repeated frequently. We also find funds and administrators identifying and responding quickly to needs for communication based on post 1 September interactions with members.
Yet, I am not convinced that communication has landed completely successfully. The high-level of member interactions with most administrators after 2 September seems to bear this out. The two-pot concepts are complex (despite attempts to make it simple), misunderstood and many members have not thoroughly read or watched what has been published. In addition, not all the information out there is accurate.
Members want to know what they want to know, not what we want them to know
Members are cherry-picking what they want to know about two-pot. Many members (not all) are understandably more interested in solving their current pressing financial problems. These are the frequently asked questions many members are asking now (despite all the communication):
- How do I get my money?
- How much money can I get?
- How long until I get my money?
- Why don’t I have R30 000 in my savings pot?
- Is R30 000 the most money I can take?
- What do you mean I need R2 000 before I can take my money?
- What happens to my investment and investment return after 1 September? Does my investment return go to all three pots?
- Do I have to be in the two-pot system?
- Is this a Government scam? Is my money still safe?
- How much will I be taxed?
But this is just the beginning … how could we drop the baby going forward?
Much like having children, once the baby arrives, that is just the beginning of the story. Teenagers are arguably more difficult to handle than babies. We have a long way to go on two pot and need to continue to identify what could go wrong and where we can head the problems off, including through communication. Here are some of the apprehensions I have:
- The tax on savings withdrawal benefits coming as a surprise to members, including arrear and penalty tax.
- Members being liable for more tax on their savings withdrawal benefit when they are assessed for tax at the end of the year.
- Arguments with members (and employers) about any savings withdrawal benefit transaction fee (and level of that fee). The debate is not simple.
- Members not getting their savings pot and retirement pot when they leave employment (especially retrenchment). Members not understanding the complexities on withdrawal.
- Retiring and not having much cash and more paid as an annuity than anticipated by members.
- Funds that have an approved section 14 transfer not permitted to pay savings withdrawal benefit payments from the transferor fund.
- Small amounts being left in funds.
- How the “per contract” (not per fund) works out in practice for savings withdrawal benefits and retirement benefits, especially on retail funds.
- Existing preservation fund members being subject to seeding and thus marginal tax rates on savings pot withdrawals.
- More Adjudicator complaints and litigation as arrear contributions are highlighted by two-pot.
It will be interesting to see the statistics the industry produces once we are further into two-pot and what we can learn from that to the betterment of funds and members.
ENDS
