The two-pot system demands members make choices for vested, savings, and retirement components – all with distinct rules and tax implications. This complexity is driving the need for personalised advice and the systemic changes to support members effectively.
The Authority is seeking information on how much it costs retirement funds and administrators to adapt their systems for the new two-pot structure.
One of its four proposals is to allow members to transfer up to a third of their vested savings to their savings component.
South Africa has the potential to boost its savings rate and secure a more stable source of funding for fixed investments, essential for driving economic growth.
Commentators did not raise any significant concerns in their responses to the draft conditions, the FSCA says.
If a fund cannot follow the standard allocation methods, it must apply for FSCA approval to use an alternative, reasonable method.
The type of fund to which a member belongs may improve or undermine the preservation of retirement fund assets, says Allan Gray.
Among other things, funds will have to show that participating in the two-pot system will negatively impact members’ benefits.
Retirement fund members must ensure their fund has their correct details and they are registered as a taxpayer with SARS.
Funds that cannot pay withdrawals because their rules are invalid must inform members why they may not be allowed to access their benefits.
Old Mutual’s learnings about what people know or expect, based on its interactions with customers and advisers.
Preservation must be encouraged, but the reality is that a retirement fund is many South Africans’ only source of savings, says Alexforbes.
Members particularly need to understand pre-retirement withdrawals, and the implications of these withdrawals, including tax and liquidity at retirement.
An application clause will provide for the Pension Funds Act to prevail over the Divorce Act where the Acts’ provisions conflict.
The Association for Savings and Investment SA and the Institute of Retirement Funds Africa also call for amendments not related to the two-pot system to be held over.
The Pension Bill will prohibit members from making a withdrawal from the savings component if the withdrawal results in insufficient funds remaining to settle a court order.
