National Treasury and the South African Revenue Service (SARS) have published draft legislation that will allow retirement funds to use their approved calculation methods when seeding the savings components of provident and provident preservation fund members who choose to join the two-pot system.
The 2025 draft Revenue Laws Amendment Bill also clarifies the conditions under which members of provident funds are automatically excluded from the two-pot system. There are two conditions: they were 55 years or older on 1 March 2021 (what is referred to as T-Day) and they have remained members of the same provident fund since then.
Members of provident preservation funds must have been 55 years or older on T-Day to be excluded from the system.
Members of provident funds and provident preservation funds have 12 months from 1 September 2024 to decide whether to join the two-pot system.
In terms of the 2024 Revenue Laws Amendment Bill (RLAB), if a member elects to opt in, a once-off seeding amount of 10% of the value of the vested component, capped at R30 000, will be calculated, and the date of seeding will be the last day of the month in which the election is made.
However, current legislation specifies that the seeding amount must be calculated based on the value of the member’s vested component on 31 August 2024.
The rules of some funds base the calculation on the value of the member’s vested component on 31 August 2024, while others stipulate the last day of the month during which the election was made. The FSCA has approved rules that provide for both approaches. Fund administrators have implemented systems based on their approved rules, which have been communicated to fund members.
The 2025 draft RLAB proposes that the calculation of the seeding amount is based on the value of the member’s vested component “as at 31 August 2024 or last day of the month in which the election was made or as may be determined by the rules of the fund”. The allocation to the savings component must be “with effect from the last day of the month in which the election was made”.
National Treasury said the flexibility provided for in the proposed amendment will allow for alignment between the law and fund rules.
The deadline to comment on the draft 2025 RLAB is the close of business on 17 January 2025.
The Minister of Finance will table the draft Bill during the 2025 Budget Review.
The proposed amendment will apply retrospectively from 1 September 2024.
