The last legal hurdle for the two-pot retirement system to come into effect has been cleared now that President Cyril Ramaphosa has signed the Pension Funds Amendment Bill into law.
The Presidency announced in a statement on Sunday afternoon that the president “has assented to the Pension Funds Amendment Bill which amends pension-related legislation to enable the implementation of the recently legislated two-pot retirement system, geared towards bolstering retirement savings”.
Once the legislation has been gazetted, the Financial Sector Conduct Authority (FSCA) can formally register the various rule amendments of retirement funds.
The Presidency notes that: “The Act requires pension funds to amend their rules, adjust their investment portfolios, and prepare administrative systems for pension fund members to apply to access a portion of their pension funds from 1 September.”
Five weeks to go
With a mere five weeks before the new legislation takes effect, the FSCA has been calling on fund administrators with outstanding rule amendments to urgently submit their outstanding documentation by no later than the 31 July deadline.
According to the FSCA, funds with outstanding rule amendments after the deadline may run the risk of not having their rules for the two-pot system registered before the 1 September implementation date.
The long-awaited two-pot system comes into effect on that date, allowing members of retirement funds to access one third of their pension while two thirds will be preserved for retirement.
The retirement industry has welcomed the ratification of the legislation.
Members will need to be patient
In a statement issued on Sunday evening, Old Mutual Corporate said the fund amendments are critical for approval before funds can start paying any claims from 1 September 2024.
Michelle Acton, retirement reform executive at Old Mutual, warns however that despite this positive development, retirement funds and administrators still have a substantial amount of work to do before they will be able to pay claims, including ensuring administration readiness and integration with the South African Revenue Service (SARS).
“Members in a financial fix will need to be patient and not bank on the money coming on the 1st of September for other commitments,” she says.
Guy Chennells, chief commercial officer of Discovery Corporate and Employee Benefits, says Discovery submitted its rules amendments for its pension and provident umbrella funds, as well as its retail funds, in April and May, with queries quickly resolved.
“There are no outstanding issues on any Discovery fund rules amendments,” he notes.
The retirement industry is expecting a flood of claims from South Africans eager to access a portion of their retirement savings come September.
“One could easily see claims volumes 50 to 80 times higher than a normal month of exit claims,” warns Chennells.
“It would not be possible to increase staffing adequately for this.
“Without a straight-through payments process, some providers could have very long payment turnaround times before savings withdrawal claims can be paid.”
Old Mutual’s Acton says there is a misconception that funds must have created the pots before 1 September. This is incorrect.
“The law comes into effect on the 1st of September, after which funds can start implementing the pots and seeding them,” she adds.
Old Mutual Corporate is still waiting for the final process for the draft Revenue Second Amendment Bill to be finalised, says Acton.
“However, the signing of the Pension Funds Amendment Bill marks a significant milestone in South Africa’s retirement landscape.”
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