Pension Funds Amendment Act signed into law, just 41 days before two-pot implementation

The Pension Funds Amendment Act requires pension funds to amend their rules, adjust their investment portfolios and adjust their administrative systems to allow pension fund members to apply to access portions of their pension funds from 1 September this year.

647 retirement funds had issued their rule amendment applications to the Financial Sector Conduct Authority (FSCA) by 21 July when the Act was signed in.

Read more: EXCLUSIVE: Two-pot reform roadblock – 85% of funds have yet to submit rule amendments

Read more: Pension Funds Amendment Bill – what’s cooking with the two-pot retirement reform?

Government has proposed a reform to the retirement saving regime, which will see the introduction of the “two-pot” retirement system. From the proposed date of 1 September 2024, retirement savings contributions will be split in two pots with one-third going into a savings component and two-thirds into a retirement component.

The money in the “savings component” will be available for withdrawal at any time before retirement, with only one withdrawal in each tax year. Between 1 September 2024 and 1 March 2025, members can withdraw:

• A minimum of R2,000.


• A maximum of 10% of their retirement savings capped at R30,000.

This initial amount available until 1 March next year is the “seeded amount”, which will be rolled out of the “vested pot” or the retirement savings that members have accumulated to date.

From 1 March 2025, the minimum withdrawal will remain R2,000, but the maximum will be whatever amount is available in the savings pot.

In a punitive measure most likely intended to discourage unnecessary withdrawals from the retirement fund savings pot, members will pay tax at their marginal rate of income on any withdrawals they make.

Read more: How much that two-pot retirement fund withdrawal will really cost you

The system is also intended to improve the current level of retirement savings and address the problem of members withdrawing all their retirement savings when they leave one employer for another. From implementation, the money in the “retirement component” will be accessible to members only when they retire.

Blessing Utete, managing executive of Old Mutual Corporate Consultants,  welcomed the news. “This is great news for funds to move forward with rule amendments with the FSCA. However, it must be noted that not all members will be able to access a savings withdrawal immediately. More than 30% of our fund members, for example, won’t be able to access any funds because they have less than R20,000 in their retirement savings, which is what is required to access the minimum R2,000,” he said.

31 July deadline for funds to submit rule amendments

While many South Africans under financial pressure will be relieved to be able to dip into a portion of their retirement savings in times of crisis, Guy Chennells, chief commercial officer of Discovery Corporate and Employee Benefits, warns that funds that have not submitted their rules amendments by 31 July can’t be certain that their withdrawal rules will be registered and approved by the FSCA before 1 September.

Zareena Camroodien, head of fund governance and trustee conduct at the FSCA, says now that the Bill has been signed into law, retirement funds have no excuse for not submitting their rule amendment applications. Rule amendment applications were initially slow but picked up in the last week.

At the beginning of July, the FSCA had received only 131 rule amendment applications.

“There are around 900 retirement funds, so that’s quite a difference. We have followed up and the feedback is that most funds are either waiting for the Pension Funds Amendment Bill to be promulgated or they are waiting for board meetings scheduled for mid-July,” Camroodien said at the time.

Last week, the FSCA indicated it was still waiting for more than 350 retirement funds to submit their respective rule amendments, and it had extended the submission deadline by two weeks to 31 July.

“Rules submitted after the 31 July extension date will not be prioritised and will be subject to normal FSCA service level agreements, and so may well not be registered by September,” the regulator said, noting that retirement funds and/or their administrators will have to take responsibility for any consequences resulting from changes the non-compliance with these legislative changes. DM