Two-pot retirement system: NCOP passes Pension Funds Amendment Bill

• Published date: 26 April 2024
• Author: Ina Opperman
• Publication title: Citizen, The (South Africa)

The objective of the Bill is to ease the financial pressure on South Africans by allowing them to access their pension savings before retirement

The National Assembly passed the Pension Funds Amendment Bill in March, taking the first step to change the pension fund system in South Africa that will give members access to a small portion of their retirement savings, but even more important ensure that they do not cash out their pensions before retirement, leaving them without sufficient funds to retire comfortably.

The Bill aims to amend the Pension Funds Act to introduce a savings withdrawal benefit and with the Revenue Laws Amendment Bill will establish the two-pot retirement system that will come into effect on 1 September this year to support long-term retirement savings while offering flexibility to help fund members in financial distress.

ALSO READ: National Assembly passes bill for two-pot retirement system – what is next?

Amendments for the two-pot retirement system

The National Assembly and NCOP amendments to the Bill will ensure that government employees, as well as employees of the Transnet, Post Office and telecommunications pension funds are included in the two-pot retirement system. The amendments also include important corrections to deal with divorce and the separation of assets.

After passing the Bill, the NCOP send it back to the National Assembly for concurrence as changes were made after the National Assembly passed the Bill. When the National Assembly passes the changes, the Bill will go to the president for signature.

Pension funds and their administrators have already started to apply for rule amendments with the Financial Sector Conduct Authority (FSCA) and change their systems to implement the two-pot retirement system. They also have to ensure that they educate their members on how savings.

While pensions funds and pension fund administrators have praised the Bill because it will ensure that people do not cash out their pensions before retirement, there is concern that people do not understand the implication, such as paying tax when they withdraw from their funds.

ALSO READ: No two-pot retirement system withdrawals already on 1 September

Two-pot retirement system will bring a massive change to pension system

Michelle Acton, retirement reform executive at Old Mutual, says the two-pot retirement system will be a massive change to the pension system in South Africa and bring the country in line with other countries.

Although members...