Cape Town - The Pension Funds Amendment Bill has been signed into law by President Cyril Ramaphosa in a move that paves the way for the recently legislated twopot retirement system to come into effect from September 1.
The bill amends pension-related legislation to enable the implementation of the two-pot retirement system, geared towards bolstering retirement savings.
The law provides for the introduction of the savings withdrawal benefit; the appropriate account of a member’s interest in the savings; retirement and vested components; and deductions that may be made.
The bill requires pension funds to amend their rules, adjust their investment portfolios and prepare administrative systems for pension fund members to apply to access portions of their pension funds from September.
The law complements the Revenues Laws Amendment Act, 2024 (Act No 12 of 2024), which was signed by the President on June 11.
The government proposed the reform to the retirement saving regime, which will see the introduction of the “two-pot” retirement system.
From the proposed date of September 1, one-third of retirement contributions will be split into a savings component and two-thirds into a retirement component.
What is in the “savings component” will be available for withdrawal at any time before retirement.
The ability to unconditionally access amounts from the savings component will be provided without the member having to cease employment or having to resign.
A member will be allowed to make a single withdrawal within a year of assessment.
The minimum withdrawal amount is R2 000. The ability to withdraw from the savings component will be applicable on a per fund or per contract basis.
Withdrawals from the savings component will be added to the individual’s taxable income and will be taxed at their marginal tax rates.
Retirement funds will on or soon after September 1 be required to create another component known as the “retirement component”. Individuals will be required to contribute an amount of two-thirds of the total individual retirement fund contributions to the retirement component.
Once a member retires, the retirement component is to be paid in the form of an annuity, including a living annuity. This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out pension funds.
Cape Argus