National Treasury is pressing ahead with implementing the two-pot retirement system on 1 March 2024 despite the uncertainty over how the system will work. Treasury said that three out of four outstanding issues will be clarified in forthcoming draft legislation.
In response to questions about when the outstanding issues will be finalised, Treasury indicated that the two-pot legislation would be finalised by the Medium-term Budget Policy Statement this year.
The proposed two-pot system will allow members of pension and provident funds, as well as retirement annuity policyholders, to access a portion of their retirement savings before they reach retirement age, without having to resign.
Last week, Old Mutual said the retirement fund industry could miss the 1 March 2024 deadline to be ready to implement the two-pot system if the reforms were not finalised in the first half of 2023.
Michelle Acton, Old Mutual’s retirement reform executive, said the industry hoped that updated draft regulations would be released with the Budget.
But the Budget Review only had the following to say: “Four areas required additional work: a proposal for seed capital, legislative mechanisms to include defined benefit (DB) funds in an equitable manner, legacy retirement annuity funds, and withdrawals from the retirement portion if one is retrenched and has no alternative source of income. The first three matters will be clarified in forthcoming draft legislation. The final matter will be reviewed as a second phase of implementation.”
Seeding relates to the ability of fund members to transfer a portion of their existing (pre-two pot) retirement savings into the accessible savings pot.
Finance Minister Enoch Godongwana needs to provide specific details on how this would work to ensure the financial stability of funds and to protect members’ benefits at retirement, said Blessing Utete, the managing executive of Old Mutual Corporate Consultants.
Provident fund members over 55
Utete said another outstanding issue related to members of provident funds who were over 55 years old. Treasury has said that these members will have the option to stay and continue contributing to their current provident regime or move into the two-pot regime.
Members who opted for the new regime would lose the ability to access 100% of their future accumulated funds in cash when they retired but would continue to have full access to their current savings accumulated before the new regime took effect. This option would be a once-only decision and irreversible once the change had been made.
Utete said the option would amount to a complex decision for members to make, and the industry needed more detail on how this would work, to advise its members properly.
Large amount of work
Acton said the amount of work necessary to prepare the industry for the system was far-reaching, as new and sophisticated automated systems would have to be developed to enable fund members to access the savings pot (the portion of their savings they are allowed to withdraw before retirement).
Old Mutual estimates that the new level of accessibility will lead to an increase of between 300% and 400% in claims to be processed by administrators.
The new system will have to allow for member-initiated claim functionality, as for the first-time members will have to register their claims without going through their employer. It would require member engagement through an automated digital platform; the retraining and capacitating of entire new call centres; fraud and risk prevention measures.
“The administrative changes will be the biggest ever seen in the retirement industry in South Africa and mean the need for an entirely new processing and service model. We will have to build a brand-new system overlayed on the existing system. This will take a massive amount of budget and resources which requires at least 12 to 18 months to build,” Acton said.
She added the two-pot regime meant that even the contribution mechanism had to be redesigned to ensure separation of payments into the two separate pots. In addition, member education and change management processes would also have to be undertaken to ensure that they understand the new system including qualifying criteria for applications and the claims process.
Acton also emphasised that retirement funds will need time to prepare for the system and plan around the liquidity and cash flow implications of a sudden exponential increase in applications. Without finalised regulations, the industry cannot be ready by March 1, 2024, as it would be near impossible to address the multitude of changes required to be compliant in less than one year.
[…] Read: Treasury presses ahead with launching two-pot system in March 2024 […]
Why is it taking government so long to finalise this law. In the mean time they ahoulsballow us access to part of our accumulated funds. We cant wait foe 3 to 4 years as we need our monies now. Many of us have besn hard hit by Covid and are drowning in debt.
I Totally agree with Paula, they are taking too long and we are really in need of money. They shouldn’t have made this announcement to the public without being finalized.
The government did not assist our “side hustles” during the Covid -19 pandemic, and we are drowning in debts because we took risks of not paying other debts in trying to keep side hustle afloat. In 2022 they said it will be implemented in 2023 and now it is 2024. By the time we retire we will have nothing to live by with, all the pension will be for debt relief. Now it is the right moment to make right.
Totally agree with all the comments… help the people now! We need help now, not in years to come! Years to come our problems would have doubled..not our cashflow!
It’s our money! Give us access to it as seamlessly as possible!
I retire in 2years time,and with the option of opted with the new regime would lose the ability to access 100% of my future accumulated funds in cash when I retire,so can i at least cash in on my surplus funds.
We still waiting for communication from Treasury it seems quite and you don’t ever know how much percentage to withdraw?
It will help the economy, because companies, firms, retailers eg, will benefit and more jobs will be created. It will assist the whole of SA.
all that they are doing is to loot our money and bail out eskom each an every year billions are been wasted,
I do not understand why we cannot access some of the funds that we already have. As the minister said that we can access our 1 third of our pension because due to lock down my house was vandalize so now I must replace all that was stolen and broke.
The whole idea off implementing the 2-pot system is to assist the people NOW, whose own monies are been held by law and only excess able when one retires or leaves employment.
The 2-pot system needs to give the people access to moneys NOW e.g. the more years’ service the more one can excess plain and simple, give the people the opportunity to choose as this is their monies,
No use implementing the 2-pot system 3 years ago and going onto 4 years trying to implement some potty-training system that we can clearly see will not be of any use to us as the amount we can only access after 1 March 2024. are peanuts in a real man’s world.
Please review the 2-potty system to benefit the people,
1. Give us excess to a percentage of our current funds,
2.Increase the total accessible from March 2024.
3.Eliminate tax from withdrawals from the 2-pot system.
Why can’t we withdraw a third off our funds now it’s our money after all. Why do I have to wait another 12 years before I can use some off my hard earned money. I need it know.
Poverty and suffering amongst the public servants families is naked for all to see. We earn enough not to qualify for government assistance in housing, NSFAS and so forth, and do not qualify for bonds and others cause we as less. We are the deliberately impoverished as per the system. Can we then atleast access what belong to us as in pension please. We also deserve decent housing and properly educated children, which are hardly possible on retirement. Reasonable portion of our pension now please. It can’t take 12 months for legislation and enabling procedures to put in place if one is serious. Happy workers and well to do workers are more productive. Just to ask, is our hard-earnt money still intact afterall? Am so trust deficit with these people. There is no loudest noise our government can hear, if they can’t see the impoverished state of the workers they misuse when ever they report to work. So heartless I must say
As a member of GEPF, I am going to access, the real one third of my resignation.or what
.Yes I agree to get our pension money or access it NOW.To pay our debts mortgage loan arreas ,kids school fees kids in arreas its a lot and so forth . Treasury must finalise Covid hit us hard like I say hard not paying properly our debts because we wanted to put food on our tables
We really need our money we are in debts life is too short
My comment is that we need our one third of what we had already saved in our retirement as from our first payment date of contribution so that we may be able to stay out of debt.
We are struggling to cope with the economic changes as everything we need for survival is more than doubled and if we pay of our debts we may make a better living for us and our children.