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Old Mutual welcomes Finance Minister's update of Two-Pot Retirement System in Budget Speech

22 February 2024 Old Mutual

Old Mutal today welcomes Finance Minister Enoch Godongwana’s Budget Speech confirmation of the commencement of the Two-Pot Retirement System set to take effect on 1 September 2024.

Michelle Acton, Retirement Reform Executive at Old Mutual, commended Godongwana’s endorsement of the system in the Budget, adding that support at the highest level of government was critical to the industry meeting the September deadline to implement the new System.

Acton said the confirmation, which followed the passing of the Revenue Laws Amendment Bill by the National Assembly on Tuesday, was a significant step towards ushering in a new era of retirement financial security for more South Africa.

In addition to these developments, Acton noted that the industry was awaiting the gazetting of the Pension Funds Amendment Bill to provide much-needed certainty on the final version of the Two-Pot Retirement System regulations. The industry also needed the requisite SARS tax processes to be finalised.

Acton said: “We hope these will be finalised by the end of March. These vital steps provide the certainty the industry needs to move ahead with the finalisation of the infrastructure needed to ensure a seamless application process on 1 September this year. These are crucial for facilitating early withdrawal claims under the new system, a process dependent on finalising the Pension Funds Amendment Bill.”

Under the new Two-Pot Retirement System, a ‘savings pot’ will receive a maximum of one-third of all retirement savings and will be accessible before retirement age. In contrast, a ‘retirement pot’ will receive a minimum of two-thirds of all retirement savings and will only be accessible at retirement. A third ‘vested pot’ will contain all retirement savings until the implementation date and follow all current legislation.

Acton emphasised that from the time both laws were gazetted, retirement funds would need sufficient time to finalise building the new systems and structures required to facilitate withdrawals for members.

“As we are encouraged by the latest developments, we note that Old Mutual has already started to prepare for the new system. Up to 1 million of our fund members can come forward and claim once the system goes live. As administrators, we are working tirelessly to streamline our processes through digitisation,” said Acton.

This latest step follows the announcement by the National Treasury in December last year that the implementation date would be moved to 1 September 2024, a decision welcomed by the pension fund industry.

Initially, in 2022, the government had communicated the implementation date as 1 March 2024. However, in the lead-up to this year’s Medium-Term Budget Policy Statement in October, the National Treasury signalled a postponement of the implementation date to March 2025. On 21 November, it announced it would reinstate 1 March 2024 as the implementation date.

Acton further highlighted the importance of public and private sector cooperation in ensuring the successful roll-out of the Two -Pot Retirement System. “We appreciate the government on heeding our concerns and input into the new system. Together, we can ensure that the industry provides the best service to South Africans relying on these funds.

“We at Old Mutual remain committed and are very happy for the positive outcomes that the Two-Pot Retirement System will have on South Africans, and we look forward to a bright new era in retirement for workers and their families,” she concluded.

Quick Polls

QUESTION

What do you consider the most significant challenge in implementing the Two-Pot Retirement System?

ANSWER

Coping with new, unfinalised legislation, leading to uncertainty in implementation
Adapting to brand new claim types, requiring the development of digital, member-initiated claims capabilities
Addressing member education and awareness to correct misconceptions and ensure understanding of the system, including tax implications
All of the above
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