National Treasury proposes limiting the amount that retirement fund members can transfer to their savings pot to 10% of the benefit they have accumulated by 29 February 2024 but with a cap of R25 000. They can withdraw any money in the savings pot immediately once the two-pot retirement system takes effect.
Allowing members to seed their savings pot is one of the key changes in the second version of the two-pot draft legislation released at the end of last week.
National Treasury and the South African Revenue Service (Sars) on Friday published the revised 2023 Draft Revenue Laws Amendment Bill and the 2023 Draft Revenue Administration and Pension Laws Amendment Bill. These draft bills contain the amendments required to implement the first phase of the two-pot system. They also take into account the public comments received on the 2022 Draft Revenue Laws Amendment Bill published on 29 July 2022.
It is proposed that the legislative amendments to the two-pot retirement system will take effect on 1 March 2024.
The draft legislation now uses the term “component” instead of “pot”, but Treasury said “pot” is still used colloquially to refer to the reform.
In simple terms, the system provides for members’ savings to be allocated to three pots (components):
- A savings component, to which one-third of a member’s contributions must be allocated. Members will be able to make one withdrawal from their savings component each tax year without resigning, although there are conditions attached to withdrawals.
- A retirement component, to which two-thirds of a member’s contributions must be allocated. The benefits in the retirement component must be preserved until a member reaches normal retirement age, as determined by the fund’s rules.
- A vested component, which will house a member’s accumulated retirement interest as valued immediately before 1 March 2024. Benefits in the vested component will be subject to the current (pre-two pot) retirement legislation.
For more details on the three components, read Latest proposals on how the two-pot retirement system will work
Sowing the seeds
The latest draft legislation provides for members to create “seed capital”, to have money in the savings component that is available for withdrawal from 1 March 2024. Members will seed their savings component by transferring a portion of their retirement benefit from their vested component.
The proposal is for the seed capital to be calculated at the lesser of 10% of the vested component or R25 000.
Note that the 10%/R25 000 transfer to the savings component is not the limit on how much members can withdraw from their savings pot each year. The purpose of the transfer is to enable members to have money available to withdraw immediately once the two-pot system takes effect and not to have to wait for funds to build up in the savings pot. From 1 March 2024, one-third of a member’s contribution will be allocated to the savings pot, and all the funds in the savings pot can be withdrawn once a year.
The draft legislation does not stipulate that members have a deadline for seeding their savings component; it states only that the transfer can take place “on or after 1 March 2024”. The implication is that members can seed their savings component at any time from 1 March 2024.
Treasury said members should note that withdrawals from the savings component will be subject to the normal tax rates (marginal tax rate) in the hands of the member.
According to the explanatory memorandum to the Draft Revenue Laws Amendment Bill, the proposed limit on the seed capital is intended to:
- Minimise the adverse impact on retirement funds’ liquidity; and
- Prevent the erosion of a member’s retirement benefit.
Withdrawals from the retirement pot?
Treasury has “parked” proposals to allow members in dire financial straits to make withdrawals from the retirement component.
Amendments dealing with withdrawals from the retirement component if a member is retrenched and has no alternative source of income will be considered in the second phase of the implementation of the two-pot system, Treasury said.
Further complementary measures may also be considered in the second phase, to ensure that the primary objectives for saving for retirement are not compromised and to protect the liquidity of such funds at all stages, the draft explanatory memorandum said.
Members should be encouraged to exercise the withdrawal option as a last resort, and to try to preserve their savings for when they retire, Treasury said.
Timeframe for public participation
National Treasury has called for comment on the revised 2023 Draft Revenue Laws Amendment Bill, the Draft Explanatory Memorandum on the Draft Revenue Laws Amendment Bill, the 2023 Draft Revenue Administration and Pension Laws Amendment Bill, and the Draft Memorandum on the objects of the Draft Revenue Administration and Pension Laws Amendment Bill.
Comments must be sent to National Treasury at 2023AnnexCProp@treasury.gov.za and Sars at acollins@sars.gov.za by close of business on 15 July 2023.
Treasury and Sars will engage stakeholders through public workshops to discuss the comments.
The National Assembly’s Standing Committee on Finance and the National Council of Provinces’ Select Committee on Finance are expected to make a similar call for public comment “later this year” and convene public hearings on the draft legislation.
A response document on the comments received will be presented to the committees. The bills will be revised, considering the comments and recommendations made during the committee hearings. The bills will then be introduced formally in Parliament for its consideration.
Commentary
Is the timeframe practical?
In a media statement, Treasury highlighted that the two-pot implementation date remains 1 March 2024. The Association for Savings and Investment South Africa (Asisa) has previously indicated that its members need 18 months to change IT systems and administrative procedures, change retirement fund rules, train staff, and communicate the changes to fund members. Asisa’s 18-month timeframe is from the date on which the legislation is finalised.
The deadline for the public to comment closes on 15 July. The legislation must also be processed by Parliament’s finance committees. It is therefore likely that – in line with what Treasury indicated at this year’s Budget – the bills will be introduced in Parliament when the Minister of Finance tables his Medium-term Budget Policy Statement, which is normally in October. If this timetable holds up, the retirement industry will have less than six months to prepare for the two-pot system. I won’t be surprised if the industry lobbies for the implementation date to be pushed out.
No incremental seeding?
The draft legislation refers to the seed capital as “an amount of 10% of the total value of the vested component as at 29 February 2024 […] limited to R25 000”. In my view, the phrase “an amount”, as opposed to “amounts” or “amounts to the total of”, indicates that seeding cannot be done incrementally – for example, a member transfers R15 000 to the saving component in one year and R10 000 in another year.
Use of the word ‘savings’
Asisa and the Council for Retirement Funds for South Africa (Batseta) have called for the savings pot to be renamed. They are concerned that the word “savings” will entrench the perception that this component is akin to a bank savings account, which will encourage members to make withdrawals to fund all kinds of expenditure, including home renovations and holidays, and not only when they have a pressing financial need. Despite this, the latest draft legislation retains the word “savings”.
I believe more people will become dependant on the State with this exercise, just my 2 cents opinion. The government is just delaying that probability and hope they do not have to pick up the bill by means of Sassa
This step will just reduce the (already inadequate) provision that most people make for their retirement, and is, in my view a regressive step that flies against the principle of putting aside on a regular and disciplined manner, and not disturbing retirement provision. A case of spend now, suffer later perhaps?
I would like to to have more insights into how two pots system work. Please
https://www.moonstone.co.za/latest-proposals-on-how-the-two-pot-retirement-system-will-work/
https://www.moonstone.co.za/treasury-wants-to-exclude-these-legacy-ra-funds-from-the-two-pot-system/
1/3% is the solution, R25000 won’t help settle our debts due to the cost living.
You say this because you have adequate funds to support your current life style ,most people do not have this luxury some people struggle to survive on less n were forced into having a pension by the company . you might say what about the future but no 1 is guaranteed a tomorrow n then all that money thats saved was never enjoyed by the person
❤️👏👏👏👏👏 That’s the reality, we suffer while paying too much pension fund, when one dies, it is enjoyed by other people 😢
I think you talk from a place of privilege I wish you could understand the struggles people face daily , already people a struggling to make end meet, withdrawing from RA is better than taking out a loan with high interest rate and digging one self into deeper financial difficulties
Agree 100%
agree
1 third or 10 % whichever is the greater
I khethiwe Ntuli I’m a member of MGF fund I don’t support your proposal mr treasurer R25000 why don’t you give employees their 1/3 that you initially promised them and consider SARS issue because we not resign don’t tax it
Workers should be given immediate access to 10% by 1 March 2024
❤️👏👏👏👏👏 That’s the reality, we suffer while paying too much pension fund, when one dies, it is enjoyed by other people 😢
that true.
Why are the employees subjected to R25000. They will still consider resigning. Employees should be only give the option of 1/3 which will be much better. The proposed withdrawal idea is a good one but the maximum mount is not good.
Yes… 1/3 is the good option.
And to add, the money must also be tax free. The 2 third is correct to be kept for retirement.
Johannes iam a member of gmrf I think government doesn’t take people sirious Enoch he thinks he is dealing with stupid
as for Cosatu they are dead
People are financially trapped, 1/3 will help out. Tax free off course 😊
Why limit us to r25000? I would like to take my whole third off my provident fund and buy a house it’s after all my money. That I’m working for the last 29 years.
why cant the entire 1/3 be granted after all it is my money the biggest financial disstress is debt
keeping us behind i mean why should i make debt to get what i need where as i have money being kept for retirement lets be realistic some people dont even get the chance to even see that money unforeseen circumstances where people died before even enjoying there own money.
the 1/3 of the retirement funds could set some of us debt free
Yes 1/3 should be released not R25 000. We are drowning in debt, what’s R25 000 going to take us to. 1/3 please. Tax free.
I think that the proposed 1/3 should be allowed by members as due to the financial situation that many employees are facing, this one third could take them out of debt and also allow them to have access to money while they are still fit and able. Many employees work all their lives and pass on as soon after their retirement and do not enjoy their years of hard work. This hard earned money most of the times goes into the wrong hands.
Government should allow the employees to take out the whole 1/3 so that they can be debt free and live life normaly. Most of us are single bread winners who actually feed the entire family of which 1/3 should help those who suffer the most.
One third is the only way of getting out of debt.i support the people
Very true…. we depressed…. I always think of resigning…… I don’t qualify for debts anymore…. 1/3 was going to help me restart.
I do not agree with the R25000.00 What will i do with the 25000.00 it is nothing. I need my 1/3 please.
25000 is a joke, 1/3 tax free to be able to pay off debts or buy a house.
I’m Mr Cw Nkalo and I’m a member of gepf and I really agree with your statement that 2500 is a joke due to the fact that people are sinking into debts and they cannot provide anything for their dependent government must start to take us seriously
Government should allow the employees to take out the whole 1/3 so that they can be debt free and live life normal. Most of us are single bread winners who actually feed the entire family of which 1/3 should help those who suffer the most , i personally disagree with that cap of R 25000.00 i think more engagement is needed with employees .
25000 is too little if it is subjected to tax .It rather be 1\3 and tax free .
If I withdraw the R25000 on 1 March 2024, its taxed at the tax marginal rate, but what if I’m already 55 years of age on that date, will the retirement tax rates be used, i.e. up to the first R500 000 is tax free?
It’s a good question. The answer depends on whether you have reached normal retirement age in terms of the rules of the fund and are actually going to retire and buy an annuity with your retirement pot. If so, then the retirement tax table applies. If not, the marginal tax rate applies.
I would like my 1/3. I work hard for my money.
R25000 is not going to help me.
Due to unforseen circumstances I had to go under debt review so I can’t purchase a car. My 1/3 was going to buy a car and household appliances.
So please consider 1/3 at least for those with over 10 years employment or 50 years of age.
It is my money after all.
From 1 March 2024, one-third of a member’s contribution will be allocated to the savings pot, and all the funds in the savings pot can be withdrawn once a year.
The recommended amount of R 25000 is too little to cater for debts most people have accumulated, especially during the COVID pandemic. One can argue that COVID has past, but the financial hole that was dug by the pandemic is too wide and deep to refill. It may take decades for some to recover. The government should consider an amount that will be enough for cover the individual’s debt, considering that it is subjected to tax. The minimum of R 1000 000 may cover at least some personal loans or arrears in mortgage payment, thus providing financial relief to cope with the costs of living from their salaries.
25000 it’s joke we should consider 1/3 of our money, don’t play games with us,ke tjhelete ya rona eo
I think that the proposed 1/3 should be allowed by members as due to the financial situation that many employees are facing, this one third could take them out of debt and also allow them to have access to money while they are still fit and able. Many employees work all their lives and pass on as soon after their retirement and do not enjoy their years of hard work or R50000.00
is better.
This 1/3 was meant to be relief funds as former Finance Minister has said,so 25 000 is nothing, we need the full amount of 1/3 so we can be able to pay off our debts
People are seriously indebted, I can’t phantom what will 25000 rands do to relieve people from their financial troubles. People should be allowed to access their 1/3 of the pension savings to cater for their debts.
R25000 is definitely not enough as I am in severe financial stress.
Wife unemployed and 2 sons (studing and schooling).
I am 57/yrs and currently working for 15/yrs and need minumum R50000 or 1/3 , to make ends meet , desperate.
25 000 are you joking 😳. 1/3 will do please 🙏 🙂 😄.
It nonsensical 25000 is not gonna change nothing we want to clear our debts
R25000 will never be enough, please reconsider and increase it to the 1/3 .
R25000 is nothing atleast R100000 will do
I agree with you 100%
R25000 is nothing. It’s not going to alleviate the financial hardship I am going through. I need the full 1/3 please
I think 25 000 is a joke ,employees are in serious debts due to Covid , I think 100 000 will be better, food are too expensive.
25000 is not enough to pay you depth off 🙄 atleast 100 000 wil make you depth free
25000 is really a serious joke, after Covid 19 negative impact, Covid 19 has even taught us not even care about debt
At least R100000 or 1/3 is much better, just to cover debt or do something if you don’t have debt
Intially 1/3 was proposed , now its being reduced to R25000, what kind of relief is R25000 in todays economy. The 1/3 was suppose to be relief in order for people to get out of debt that have fallen behind due to Covid, etc. Plus tax added to R25 000. Then for me this whole exercise is a waste of time becasue R25 000 will not assist people there will still be those who opt for resignation which will defeat the purpose of this reform. I seems more about protecting the funds and not the people contributing to those funds. Just my opinion.
Government should stick to its initial plan of allowing employees to have access to 1/3 of their pension fund. life is too expensive, and salaries alone cannot even cater the basic needs of the people. A once of lump-sum can alleviate the financial burden that people carry every day. 1/3 is a good solution and the best way to go.
R25000 is nothing, initial plan of 1/3.
I’m Teboho Tsie a member of SALA Pension Fund, Treasury’s proposal is not realistic.If really government wants to assist burdened workers,they should stop playing marbles with the people.
A once withdrawal of 1/3 of workers pension contributions, will be enough to assist.Goverment must stop playing with people’s feelings.PLEASE.
please 30 percent
We are heavily indebted as public servants. We are swimming in an ocean of debt. R25 000 is a drop in the ocean. Some of us will not live to see our retirement because life expectancy has decreased. Government must allow us to withdraw 1/3rd of pension savings. Pension savings belong to us, not to government.
You are right, they can even pay it directly to who ever we owe.
25000 is wast of time please give us our 1/3 we really need it badly same of us need to buy house get pay off debit
Why government can’t it use this pension/ provident fund to pay off our debts then make arrangement for higher contribution thereafter to cover what was taken. This is interest free unlike the bank loans.
wait until all your money disappears just after withdrawing the r25000. this once off withdrawal of r25000 is just to give access of the remaining funds to the looters.
I would like to say,if indeed,south african government want to help us or relieve its people from debts,they should consider the fact of text free from our potion of retirement money, that R25000 is too little, to be text and to cater our life needs, we need real homes,pay out our debts I can mention all.please than to have the government that chewing our money in the name of tax.
SA government is not serving the people it should serve. It looks like it is the government for the rich only. What on earth does 25k buy in this time and era? Rather settle our debts directly instead of bullshitting us. Most of us live like unemployed people in the name of preserving our savings for old age. We have kids to maintain now, or should all our kids fend for themselves whilst they have working parents?
If the Government is serious about improving our lives then at least 1/3 of our pension money must be made accessible. What are we going to do with R25000 in this hard time where everything is so expensive, we need to build or settle our houses bonds, I mean we want to leave better and pull out of debts. The 25000 which a pocket money for all Ministers wont really make it please be realistic.
It’s really seems government is more worried about the fund please think about the members who is contributing we earn too small to buy houses and earn to much to qualify for rdp
25000 is an insult really, what changed the initial 1/3 ? Ai South Africans there’s a serious problem in the Country 🤞🏽🤦🏽♂️🤦🏽♂️😳
Pls give us 30% , it could help lot of people to settle their debts and live a better life.
After all what was this idea all about. As for 25k it won’t help us anyway is too little.
I think a cap of R25000 is not adequate unless it can be raised to 50 percent not 10 percent considering the high cost of living,but in the same breath I’m afraid of the fact that, any money can be withdrawn whereas the legislation once passed can stipulate something else on the basis of “ANY MONEY “can be withdrawn from the ‘savings pot’ as these are still draft legislations, but let’s wait and see till the time comes.
I also feel that the r25000 is a joke. 1/3 will be a solution to most of gepf members. Most people die around 55 to 65 years of age and their hard earned money goes back to the government.
What’s happening? What’s this about R25000 withdrawal? To put it bluntly Pension Funds
belong to the Members (Current Employees) and Retirees. Once a Pension Fund has been established the Employer has no say about its rules. A Pension Fund is a stand alone fund (business) and establishes its own rules. But it seems as if there’s some confusion about the position of pension funds vis-a-vis the employer. The inflow of contributions to a pension are capital contributed by the worker. It might seem as if the employer also contributes to a pension fund but this is not so. The contributions by an employer represent a salary sacrifice by the worker e.g. Workers Salary should be R11 000 p.m. but R10 000 is paid to the worker which is reflected on the paysheet and the other R1 000 is paid into the pension fund on behalf of the worker while the direct pension contribution of the worker is reflect on his paysheet. The question arises Why are employers represented on pension funds? By having Employer’s representatives (trustees) on pension funds they are able to influence its policy.
where is our union???
This idea is really demeaning us in all levels. this is not a good move and it is going to mkae the matters worse
we dont have unions any more in this government.
1/3 like it should be obvious 25000 is only going to cause people to spend it on anything non complacent and lost 1/3:can be put towards settling debt or even asset purchase that will improve economy plus people’s way of living
I really dont understand why they talking about 25000 in this days we are going deep in debt we need our 30 percent to settle our debt this government dont take us serious .or this will happen to only government employee?
I am not supporting 25000 is to little, it won’t solve the debts that people have rather give them 1/3 of their savings.
I need R150 000 as in like yesterday in order to purchase the land. What will R25 000 do for me? A complete waste of time and a slap in the face. The proposed withdraw amount must be increased
Thank you for explaining how the savings pot on 1 March 2024 would work. It makes perfect sense!
R25 000 realy what happen to 1/3, there’s nothing we can do with this money please don’t play with us this is our money. I am sinking in debts that are more than R25 000 right now.
I really don’t agree with R25 000 period.
People have a right to take decisions with their finances. Let’s not think for other people about their money. When they are in debts or finacial stress no one could assist them. This is a good move for people to take decisions about what is due to them. People must have options about their finances. People need money as soon as today.
30% is better than nothing we are indebts please
25k is nothing now days it should be at least 50k or 100k we are drowning in debt and
the cost of living is high look at the bond repo rate look Food prices
I agree with you 100%. Why must they decide for us as if we are children. At the end of the day it is our money. 25k is nothing. The cost of living is high these days. The richer get richer and the poor get poorer. Food, fuel everything has gone up. Other people die before they reach the retirement age. Why don’t they allow people to enjoy their money whislt they are still alive.
The 25k is not a good option it is better given our one third tax free I think I won’t be taking this offer only route to take is resign and take my money .
25000 too little, one third pls, that can buy us the life we deserve
Lefu Sefatsa
25000 is too little . I really support the 1/3 of our pension idea to have access to it. The cost of living is too high and R25000 it’s nothing and a waste of time.
25000 it’s joke minister let’s consider 1/3 after all it’s our money
The idea of 25K cab is ridiculous. It’s like one size fits all type of an arrangement while our contributions and and situations are different. Decide on the percentage and leave it at that.. whether it is 1% or 33%, the seed amount will be based on how much you have saved. Once off percentage withdrawal is also a better option for people who want to settle big debt like bond and make a land purchase.
25000 it’s joke minister let’s , 1/3 will help a lot .
During Covit19 the poor benefited a lot from government ,the R350 grants ,food parcels
Small business benefited from government.
What did the working force of SA (The working class ) receive ,nothing
instead they fell more in debts .
Trying to feed their own immediate family ,and then assisting other family member who don’t have food during the hard lock down.
Covid19 has show us that life is too short ,so we need to enjoy our pensions whilst we are still living.
Pension funds rob our people when they go on pension ,receiving small amounts on monthly payment from their pensions ,they only eat the interest of the pensions and dies before eating their capital that they worked very hard for years.
Its not fair …let us have our 1/3 please ,so people can pay off their bond and loans
and start life afresh.
We all suffer equality during Covid19, help us recover in our finance .
25000 taxed…is nothing Minister… Our people are really suffering in debt..please give us the opportunity to restart our lives and to enjoy our hard earned money tax free… That is only fair to us.. 1/3 tax free will help our people alot.
1/3 tax free please.25k is nothing please
The cost living is very high, fuel, electricity, food, transport and in order to make ends meet, we take loans which we can not afford to pay, we are blacklisted and under debt review. Cost of life stresses us to such an extent that we are chronically sick. We are going to die before we enjoyed our highly paid pensions and the other people will enjoy them. 1/3 will make it, our lives will be better as we will pay our debts.
Indeed our government act like they think for us but they not cos they know very well that most we are breadwinners drown in debts but insulting us with R25k while they started well with 1/3 which was helpful .so they need to reconsider the 1/3 before march 2024
hi, pls help , i was employed in 2002 and my retirement annuity from old mutual was paid up only in 2007 before i lost my job in 2013, i have since became homeless although i have R37000 sitting in my RA which old mutual is always refusing to release irrespective of my situation and numerous attempts to get it.DO i qualify for this new reform?
Your RA fund might be part of the two-pot system if it is not what is called a legacy RA, essentially one that consisted of a savings and a life insurance component.
A caring and loving government, will allow GEPF members to have their 1/3 pension money. Any amount less than that is just a disgrace. Many public servants are deep in debts. 1/3 of their pension money, please!!
I AGREE 100% WITH EVERY ONE. WHAT ON EARTH IS R25.000 SUPPOSED TO DO , PEOPLE ARE LITERALLY SWIMMING IN DEBT , THE UNEMPLOYMENT RATE HAS INCREASED DRAMATICALLY BCOZ PEOPLE ARE RESIGNING IN ORDER TO GET THEIR PENSION MONEY . A 1/3 TAX FREE WITHDRAWAL WILL BE THE LIFE LINE THAT MOST PEOPLE NEED RIGHT NOW .
R25,000 is a joke guys,why they give us 1/3 of our money.
No is fine for those who still need money right now but is little CRS