The FSCA plans to roll out a nationwide “Know Your Rights” campaign to educate retirement fund members, trustees, and the public about their rights and responsibilities regarding retirement fund contributions and the two-pot retirement system.
In August last year, the FSCA published an inaugural list of 3 262 employers that were allegedly in arrears with their retirement fund contributions at the end of April 2023. In March this year, it published a communication containing the names of more than 4 178 entities that were allegedly non-compliant with section 13A of the Pension Funds Act (PFA) at the end of July 2023.
“This means that these employers are withholding what is owed to their employees and are in violation of section 13A of the Pension Funds Act, which regulates the payment of retirement fund contributions,” the Authority said.
Arrear contributions not only negatively impact members’ withdrawal benefits but may also have a significant prudential impact on some funds.
Read: Arrear contributions: publishing employers’ names ‘is having an impact’
Clarifying the two-pot retirement system
The Authority also aims to “demystify” the two-pot retirement system through its campaign. This reform addresses two main challenges: the lack of fund preservation and the inability of members facing financial distress to access their retirement savings in emergencies.
President Cyril Ramaphosa signed the Revenue Laws Amendment Bill into law on 1 June, with the Pension Funds Amendment Bill expected to follow suit soon. These Bills are crucial for implementing the two-pot system, which involves changes to the Income Tax Act and the PFA. The rollout of the two-pot retirement system is set for 1 September.
Under this system, retirement fund members can withdraw a portion of their savings without needing to resign. Funds will be structured into three components: a vested pot, a savings pot, and a retirement pot.
- The vested pot holds existing retirement savings accrued up to the system’s implementation, with no further contributions accepted from 1 September.
- From September 1, one-third of contributions will go into the savings pot, which receives a seed capital (10% of the member’s fund value up to R30 000) transferred from the vested pot.
- The remaining two-thirds will be allocated to the retirement pot, preserved until retirement, and used to purchase an annuity.
Members can withdraw from the savings pot once per tax year, with no specific limit but a minimum withdrawal of R2 000 is required. Withdrawals are taxed at the individual’s marginal rate, with an administration fee deducted before the net amount is paid out.
Upon retirement, any remaining savings pot balance can be taken as a lump sum or transferred to the retirement pot to buy an annuity.
What can you do?
The FSCA encourages consumers who are members of retirement funds to check whether their employer is on the list of non-payers by referring to FSCA Communication 10 of 2024.
“If you have been affected, approach your employer to pay over the owed amounts and contact the retirement fund to enquire whether the employer has rectified or is co-operating to rectify any outstanding amounts,” the Authority advised.
Consumers can also engage with their fund’s board of trustees and/or the fund’s administrator, to find out more about the two-pot system.
