Major worries over South Africa’s new two-pot retirement system

The Standing Committee on Finance’s rejection of National Treasury’s recommendation that the Two-Pot retirement system be delayed has left the asset management industry anxious.

The committee said that the Two-Pot system will be implemented on the original date of 1 March 2024, denying National Treasury’s recommendation to delay the system’s implementation to 1 March 2025.

Under the new system, South Africans will be able to access up to one-third of their retirement funds before retirement through a “savings pot.”

The other funds will be locked in a “retirement fund,” which will only be accessible when the member retires.

Old Mutual’s Michelle Acton said that the delayed implementation would have allowed the industry more time to prepare for the major changes to retirement systems.

She noted that Old Mutual’s readiness on the 1 March 2024 deadline rests on the finalising and gazetting of the 2022 Draft Revenue Laws Amendment Bill and the required Pension Fund Amendments – which govern the Two-Pot system.

“In 2022, we confirmed that we would be ready for the Two Pot Retirement System on the condition that the relevant legislation was finalised expeditiously. As we approach the end of 2023, the legislation remains unfinalised, hindering our ability to fully prepare for the system’s implementation,” she said.

The implementation also depends on the South African Revenue Service (SARS) and Financial Services Conduct Authority (FSCA) being entirely ready for the system, which is challenging without the Bill being gazetted. 

“The industry relies on SARS to guide us on their requirements for processing early withdrawal claims. Without this critical information, we cannot complete the system modifications to handle these transactions,” Acton added.

On top of the system’s readiness, member education and awareness are essential to the new system’s success.

With the numerous moving parts, Old Mutual said that it will be difficult to be ready by the 1 March 2024 deadline.

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