President Ramaphosa Signs Pension Funds Amendment Bill into Law

Sunday, 21 July 2024

President Cyril Ramaphosa has officially signed the Pension Funds Amendment Bill into law, aimed at strengthening retirement savings in South Africa. This legislation is a crucial step in the implementation of the new two-pot retirement system, which is designed to enhance the retirement savings framework for South Africans.

The newly enacted Pension Funds Amendment Act amends several pieces of existing legislation: the Pension Funds Act of 1956, the Post and Telecommunications-Related Matters Act of 1958, the Transnet Pension Fund Act of 1990, and the Government Employees Pension Law of 1996. This comprehensive amendment introduces a savings withdrawal benefit, delineates members’ interest in both savings and retirement components, and specifies permissible deductions.

Starting from 1 September 2024, pension funds will be required to update their rules, adjust their investment strategies, and prepare administrative systems to facilitate members’ access to parts of their pension funds. This law is designed to work in conjunction with the Revenue Laws Amendment Act, 2024 (Act No. 12 of 2024), which President Ramaphosa signed on 11 June 2024.

The government’s proposed reform introduces the “two-pot” retirement system. Under this system, one-third of retirement contributions will be allocated to a savings component, with the remaining two-thirds directed to a retirement component. The savings component will be accessible to members at any time before retirement, without the need to cease employment or resign. Members will be allowed to make one withdrawal per year, with a minimum withdrawal amount of R2,000. These withdrawals will be added to the individual’s taxable income and taxed at their marginal rates.

Furthermore, retirement funds will need to establish the “retirement component” within the existing fund by or soon after 1 September 2024. Members are required to contribute two-thirds of their total retirement contributions to this component, which will be preserved until retirement. Upon reaching retirement age, members will receive payouts from the retirement component in the form of an annuity, including living annuities.

This legislative change aims to provide greater flexibility and security for retirement fund members, allowing them access to a portion of their retirement savings without the need to resign or cash out their entire pension.