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

With just more than two weeks to the recommended closing date for submissions, 85% of retirement funds are yet to submit the required fund rule amendments to the Financial Sector Conduct Authority for approval and registration.

Speaking at a Daily Maverick Money Cents webinar yesterday, Zareena  Camroodien, head of fund governance and trustee conduct at the FSCA said only 131 of just under 900 funds that have submitted their rule amendments — which are supposed to be submitted by 15 July. The date was chosen to give the FSCA and funds time to review and approve the rule amendments before the two-pot retirement reform is implemented from 1 September this year — just more than two months away.

Retirement funds that do not have their rule amendments registered by 1 September will not be able to process any two-pot withdrawal claims from their members.

“Over 700 funds still need to submit. Our retirement fund supervision division has inquired and engaged administrators and funds to find out where they are in the process,” she said. Some of the feedback includes funds waiting for board meetings to be concluded (some of which are scheduled for mid-July), before they can submit the rule amendments.

Camroodien said the FSCA is aware that some funds are waiting for the Pension Funds Amendment Bill to be promulgated. “That should not be a motivating factor to wait, because we will not approve and register the rules before that legislation comes into effect.  However, we do need time to do the necessary work on the back end, in the reviews and authorisation department,” she advised, adding that the sooner funds send in their rule amendments, the better.

Submissions made before 15 July 2024 will be processed on a ‘first-come-first-served’ basis and any submissions made after 15 July 2024 will only be processed once the first batch has been completed.

Tax consequences for funds

Guy Chennels, chief commercial officer of Discovery Commercial and Employee Benefits notes that failure to register rule amendments in time could impact the tax approval status of retirement funds when the South African Revenue Services (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 said.

Wayne Hiller van Rensburg, executive director at the Institute of Retirement Funds Africa (Irfa) said the body strongly encourages funds to prepare and submit rule amendments to the FSCA as soon as possible.

“Having said that, we are cognisant that many funds are in limbo, waiting on the promulgation of the Pension Funds Amendment Bill. The rule amendments are also not as simple as inserting a few clauses. The changes will have significant impact, requiring several rule amendments. For example, the treatment of divorce allocations in light of the two-pot reform will have to be addressed. If funds fail to address this, it can be considered ambiguous. So, what seems like simple rule amendments can actually be quite complex,” he says.

That cautionary seems to be backed by the offer of a “two-pot readiness pack” by Bowmans, which is available to retirement funds at a cool price tag of R50,000 plus VAT.

The Bowmans two-pot readiness pack includes:

• A template for ‘two-pot’ rule amendments, which is based on a typical defined contribution provident fund, but can easily be adapted for pension funds. The template rules incorporate the proposed amendments to the Income Tax Act and the Pension Funds Act.


• Outline of a fund’s ‘two-pot impact assessment’ — to identify the aspects of business, operations, and management that may be impacted, and the plans and procedures needed to cater for the changes required by the new system.


• A template communication to defined contribution pension fund and provident fund members, in line with FSCA requirements. DM