The FSCA has granted retirement funds a temporary exemption from using the prescribed application forms for approving amalgamations and transfers of retirement fund benefits.
The exemption will apply pending the finalisation of the amendments to Conduct 1 of 2019 and is subject to funds using the revised forms.
Conduct Standard 1 of 2019 (PFA) sets out the conditions and requirements for amalgamations and transfers under section 14 of the Pension Funds Act (PFA). The Standard provides guidelines and procedures that retirement funds must follow when applying for amalgamations or transfers, including the completion of application forms and compliance with regulatory standards.
In terms of the two-pot retirement system, retirement funds must distinguish between three components: a vested component (contributions plus fund interest as at 31 August 2024), a savings component (one-third of contributions from 1 September 2024), and a retirement component (two-thirds of contributions from 1 September 2024).
Members can transfer between the different components within the same fund (subject to limitations) and between different retirement funds.
Conduct Standard 1 of 2019 does not align with the two-pot regime because the application forms allow for a single transfer value only. In terms of the pot system, section 14 forms must differentiate between the different components to be transferred. As such, the section 14 application forms must be revised.
This resulted in the FSCA in May publishing for public consultation the Draft amendments to FSRA Conduct Standard 1 of 2019 (PFA) – Conditions for amalgamations and transfers in terms of section 14 of the PFA.
The draft amendments proposed:
- removing the section 14 application forms from Conduct Standard 1 of 2019; and
- enabling the FSCA to determine the manner of submission, content, and format of the section 14 application forms in line with section 108(2) of the Financial Sector Regulation Act (FSRA).
Read: FSCA proposes amending the conditions for section 14 transfers
In a communication issued last week, FSCA deputy commissioner Katherine Gibson said commentators did not raise any significant concerns during the consultation process, so no substantial changes have been made to the draft amendments. As such, a second round of consultation will not be necessary.
She said the FSCA intends to submit the draft amendments and supporting documents to National Treasury to facilitate the submission of the documents to Parliament in terms of section 103(1) of the FSRA.
In a parallel process, the section 14 application forms were revised to reflect the changes introduced through the two-pot system.
The draft determination in terms of Conduct Standard 1, with the proposed forms, were published for public consultation in June.
Read: FSCA sets out how benefit transfers must be effected during transition to two pots
The Authority received submissions were received from six stakeholders, to which the FSCA responded, Gibson said. These responses are appended to Communication 31 of 2024.
The Authority’s intention is to determine the section 14 application forms by notice on the FSCA’s website once the draft amendments to Conduct Standard 1 take effect.
Gibson said the draft amendments will not be in effect by 1 September, when the two-pot system took effect, because the consultation process prescribed by the FSRA will not have concluded.
Therefore, as an interim measure, the FSCA on 29 August published a Notice exempting retirement funds from using the application forms currently prescribed in Conduct Standard 1. This general exemption is subject to funds using the new revised forms appended to the exemption Notice.
The exemption will apply pending the finalisation of the prescribed consultation process on the draft amendments. The exemption will be withdrawn once the amendments are finalised and the determination notice is published on the FSCA’s website.
Click here to download RF Notice 18 of 2024.
To download the revised application forms, go to www.fsca.co.za > Regulatory frameworks > Retirement funds > FSCA communication > FSCA Communication 31 of 2024
