The FSCA has published the finalised conditions that legacy retirement annuity (RA) funds must meet for them to be exempted from the two-pot retirement system.
Amendments to the Income Tax Act (ITA) via the Revenue Laws Amendment Act, 2024 enable the FSCA to determine the conditions under which a legacy RA policy or fund will not be subject to the two-pot system.
Section 1 of the ITA defines a legacy RA as “any policy held by a RA fund entered before 1 September 2024 with a pre-universal life or universal life construct, subject to such conditions that the FSCA may determine”.
These policies allowed individuals to buy an assured lump sum on death and to share in investment returns at portfolio level via, for example, reversionary bonuses on their savings, without a defined fund value.
On 19 July, the FSCA published, for comment, a draft of the conditions that legacy RAs must meet for them to be exempted from having to establish savings and retirement components, in terms of the two-pot system. Stakeholders were given until 16 August to submit comments on the proposed conditions.
Read: Proposed conditions for legacy RAs to be exempted from two-pot system
The Authority received comments from only two stakeholders, the Association for Savings and Investment South Africa and Momentum Group.
“No significant concerns were raised by either commentator, and the comments resulted in minor drafting refinements made to the wording of the conditions,” FSCA deputy commissioner Astrid Ludin said in a communication published on Monday.
The Authority has published a document setting out all the comments received and the FSCA’s responses to each comment.
It has also published RF Notice 17 of 2024, which is the final determination of the conditions for legacy RAs to be excluded from the two-pot system.
Ludin said the FSCA may at any time request information or documentation from a fund to evidence compliance with the conditions.
For more information, please email Ms Fikile Mosoma at fikile.mosoma@fsca.co.za or Ms Giulia Tognon at giulia.tognon@fsca.co.za.
