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Ramaphosa signs Revenue Laws Amendment Bill into law – green light for two-pot retirement reforms

Ramaphosa signs Revenue Laws Amendment Bill into law – green light for two-pot retirement reforms
Neesa Moodley
By Neesa Moodley
2 Jun 2024
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While the rest of the country was still reeling from the national elections on 29 May and waiting for the results amid a sea of coalition conjecture, President Cyril Ramaphosa quietly signed the Revenue Laws Amendment Bill into law on Saturday, 1 June.

Unlike the controversial National Health Insurance Act though, this piece of legislation is likely to be welcomed with relief rather than dismay – by citizens and the financial services industry alike.

Guy Chennells, chief commercial officer of Discovery Corporate and Employee Benefits explains that this means the signing of the Pension Funds Amendment Bill is imminent, and the scheduled two-pot retirement system rollout is likely to move ahead on 1 September 2024.

“This legislative action signifies the final step towards the implementation of this new retirement system and effectively means there is no turning back,” Chennells says. However, it does mean that retirement fund administrators, in particular, have only a few months left to organise their affairs, particularly regarding pending legal matters.

Chennells emphasises that this is a crucial period for all providers to ensure they are fully prepared for the potentially unprecedented volumes of savings withdrawal requests coming their way from clients who may still be battling with financial woes in the aftermath of the Covid pandemic and the financial headwinds facing all South Africans.

Managing executive of Old Mutual Corporate Consultants Blessing Utete says the success of the two-pot retirement system hinges on thorough preparation and targeted member education.

“One of the most important points to communicate to members is when their money will be accessible. Even though the legislation goes live on 1 September, it doesn’t mean funds may be able to pay out on that date as there are several steps that need to be implemented first,” he said. 

Retirement funds need to amend rules by mid-July


Retirement funds have until 15 July to submit their rule amendments for registration so that new fund rules can be registered and approved before 1 September. Retirement funds submitting rule amendments after 15 July stand the risk of their amendments not being registered in time, which will result in the delay of implementing two-pot reforms and paying out savings withdrawal claims.

In a nutshell, if your retirement fund does not register rule amendments for two-pot implementation with the Financial Services Conduct Authority (FSCA) by 1 September, this means you will not be able to make any savings withdrawal claims. Chennells says this could also impact the tax approval status of retirement funds when the South African Revenue Service (SARS) does its annual tax assessments. “If retirement funds lose their tax approval status, it will mean that contributions to retirement funds are then no longer tax deductible and employers could have an industrial relations disaster on their hands,” he cautions.

Automated processes will alleviate bottlenecks 


“The volumes (of withdrawals) are expected to be unprecedented,” Chennells says. Finance Minister Enoch Godongwana indicated in his 2024 Budget Speech that he was anticipating a R5-billion revenue windfall from taxing two-pot withdrawals in the next financial year.

Chennells says this highlights the importance of providers being able to process claims on a “straight-through process”. This refers to an automated electronic payment process which does not need manual intervention.

“One could easily see claims volumes in September being 50 to 80 times higher than a normal month of exit claims. It would not be possible to increase staffing adequately for this. And so, without the straight-through process for payments, providers could have very long payment turnaround times before savings withdrawal claims can be paid,” Chennells says.

How the two-pot retirement rules will work


From 1 September, members will see 10% of the value of their retirement fund, capped at R30,000, allocated to their savings pot under the new system. From that point on, two-thirds of any new savings will be allocated to the retirement savings pot and may not be accessed before retirement.

Members of provident and provident preservation funds who were 55 or older as at 1 March 2021, will have the choice of whether to opt into the new system or stay in the current system.

Michelle Acton, retirement reform executive, explains that seeding calculations can only be conducted after the end of August, using the values from that month. “The legislation allows for seeding calculations soon after implementation, not necessarily on that date – as a result, actual access for members will likely take place after 1 September,” Acton said. 

The seeding calculation, which determines the initial amounts to be allocated to different “pots” or accounts based on existing retirement savings, relies on the current amount of savings in each member’s retirement account and their market value. This process could take several working days to weeks, depending on the rules set by each retirement fund.

Fund members will need to have their tax affairs in order to apply for a savings pot withdrawal, and SARS may deduct any other outstanding tax before payment is made. All members must have a tax number to apply for a savings pot withdrawal. DM

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