The Financial Sector Conduct Authority (FSCA) is set to launch a nation-wide 'Know Your Rights' campaign aimed at educating Members and the Boards of Trustees of Retirement Funds, as well as the public, about their rights and responsibilities regarding retirement fund contributions and the two-pot retirement system (otherwise known as the two-component system).
Arrear contributions
This nationwide initiative follows the FSCA's initial communication published on 01 September 2024 and a subsequent communication published on 26 March 2024, which identified over 4178 South African employers who are behind in making retirement fund contributions towards employee retirement funds, which ultimately forms part of the employee remuneration package. This means that these employers are withholding what is owed to their employees and are in violation of Section 13A of the Pension Funds Act (PFA), which regulates the payment of retirement fund contributions.
Two-pots system
The campaign also aims to demystify the two-pot system, an important retirement reform aimed at addressing essentially two challenges: the lack of preservation and the lack of access to retirement fund savings in cases of emergencies by members who are in financial distress but who have assets within retirement funds. The President signed the Revenue Laws Amendment Bill into law on 1 June 2024, and the signing of the Pension Funds Amendment Bill is imminent. Both Bills are required to give effect to the two-component system as it relates to changes that must be made to the Income Tax and subsequent Pension Funds Act. The two-pot retirement system is confirmed to roll out on 1 September 2024.
Two-pot system refers to the creation of two-pots: the savings withdrawal pot is the pot to which one-third of the contributions will be allocated; this pot may be accessed once a year, subject to a minimum withdrawal of R2000 and noting that it will be subject to normal marginal tax rates and other fees. The second one, the retirement pot is the pot to which two-thirds of retirement contributions will be allocated and compulsorily be preserved until the member’s retirement, to purchase an annuity. Importantly, this system will apply only from 1 September 2024, meaning that all retirement savings accrued up to that date will be ringfenced and continue to be subject to the pre-1 September treatment (this is known as the vested pot and comprises members’ fund credits up to 31 August 2024).
What can I do?
The FSCA encourages consumers, who are members of retirement funds, to check if their employer is on the list of non-payers by referring to FSCA Communication 10 of 2024. If you have been affected, approach your employer to pay over the owed amounts and contact the Retirement Fund to enquire whether the employer has rectified or is cooperating to rectify any outstanding amounts.
Consumers can also engage with their Fund’s Board of Trustees and/or the Fund’s administrator, to find out more about the two-pot system.
More information will be issued via above and below the line media to create further awareness.
For more information about the campaign email enquiries@fsca.co.za / CED.Consumer@fsca.co.za or contact the call centre on 0800 203722
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