Big questions over South Africa’s new pension system
Several questions still remain over South Africa’s new two-pot retirement system following the Medium Term Budget Policy Statement earlier this week.
The new system will allow South Africans to take out a small portion of their retirement savings in case there is an emergency.
A savings pot will allow for a maximum of one-third of contributions, which can be accessed before retirement.
A second retirement pot will need a minimum allocation of two-thirds and will only be accessible at retirement.
A third vested pot will also be part of the two-pot system and will hold the accumulated retirement funds from before the two-pot retirement system.
Amidst concerns that the asset managers will not have enough time to change their systems when the two-pot retirement system comes into effect, the National Treasury recommended that the introduction of the system only come into effect in March 2025.
National Treasury also recommended the seed capital for the savings pot should be increased from R25,000 to R30,000 when the system launches.
That said, in the MTBPS, Finance Minister Enoch Godongwana made no mention of the new two-pot system.
If the Minister does not give the green light for the delay, the system will still launch on 1 March 2024.
This is despite asset managers stating that a delay would allow for careful planning and consideration and a far smoother transition for the retirement industry.
“We stress the importance of member education to empower individuals to make informed decisions about their retirement savings,” CEO at Momentum Corporate, Dumo Mbethe, said.
“The extended period should offer us all an opportunity for constructive engagement with all stakeholders to refine the implementation plan and address potential challenges.”
Earlier this year, Sanlam warned that it did not expect any postponement in the legislation, as 2024 is an election year, with the new laws often used as a vote-gathering tool.
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