South African pension fund members who are eager to access a portion of their retirement money on 1 September may have to wait a while longer, as the legislation that underpins the two-pot system is nowhere near complete.
Old Mutual group CEO Iain Williamson said on Wednesday the implementation date “may slip”. He made the comment when briefing the media on the group’s annual results for the year ended 31 December 2023.
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Finance Minister Enoch Godongwana announced in his 2024 budget speech that 1 September 2024 is the official implementation date of the two-pot retirement system.
The implementation date was the subject of heated debate in parliament. In November 2023, members of parliament’s finance committee overrode National Treasury’s preferred implementation date of 1 March 2025, insisting that it must be brought forward to 1 March this year.
This caught the retirement sector on the back foot, with pension fund administrators expressing concern that their systems would not be ready by March 2024.
They argued that the South African Revenue Service (Sars) and the retirement industry would need until 2025 to adapt to the proposed changes on how SA retirement funds are to be invested in the future.
Pension funds must also make provision for adequate liquidity to be able to pay beneficiaries who want an early payout from the savings pot.
Treasury made a compromise with the September date.
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Changes to legislation still needed
Williamson said on Wednesday the implementation date is less than five months away and there are still “moving parts”.
“[For example], a parliamentary agenda is needed between now and 1 September in terms of legislation that needs to get passed to enable this. There is the risk that the dates may slip.”
South Africa’s sixth parliament or administration term ends mid-May before the general election on 29 May. A new parliament will only be reconstituted once a new government has been elected.
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Although a new parliament could be appointed sometime in June, it will still leave the new lawmakers with around three months to consider public comments, make another round of amendments, then vote and pass the legislation. Only then can the legislation be published and signed into law.
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The pieces of legislation that need to be amended are the Revenue Laws Amendment Bill and the Pension Funds Amendment Bill for private sector retirement funds. In addition, the Government Employees Pension Law also needs amendment for funds in the public sector. Each draft law is in various phases of parliamentary processes but is nowhere near finalisation.
Williamson said Old Mutual expects a “flurry of fund withdrawals” when the so-called two-pot retirement system is finally implemented.
“As one of the biggest retirement administrators in the market, we can expect to see material outflows from the effective date for a few months, and then there’ll be a steadier state, followed by a recovery.”
Read: Old Mutual readies for high pension savings cash-outs as two-pot day nears
Nevertheless, Williamson views the two-pot system as “an industry positive” as pension fund holders can still preserve their retirement savings when they move jobs.
Contributions to retirement funds will be split, with one third going into a ‘savings pot’ and two thirds going into a ‘retirement pot’.
Retirement fund members will be able to withdraw amounts from the savings pot before they retire, while the amount in the ‘retirement pot’ remains protected.
