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The impact of SA’s Pension Funds Amendment Bill

20 May 2024 Myra Knoesen

The unveiling of the Pension Funds Amendment Bill in South Africa signifies a notable stride in the adoption of the Two-Pot Retirement System.

This bill proposes alterations to the Pension Funds Act to facilitate the implementation of this new system, geared towards bolstering retirement savings. It delineates the suggested modifications and the legislative journey towards the anticipated rollout.

Furthermore, it delves into proactive measures retirement fund providers can adopt to ready themselves for this transition, encompassing training initiatives, rule amendments, and adjustments to operational procedures.

FAnews spoke to Michelle Acton, Retirement Reform Executive at Old Mutual and Prabashani Naidoo, Chief Legal Specialist, at Liberty Corporate Benefits about how they anticipate the implementation of the system will impact retirement fund providers and their members, the challenges they foresee in aligning existing processes and systems with the requirements of the system and more.

The impact on providers and members

According to Acton, the implementation of the Two-Pot Retirement System will fundamentally alter the landscape for retirement fund providers and their members. 

“We believe it will, in the long-term, bolster financial security for members by granting limited pre-retirement access to funds while securing the principal sum for retirement,” she said. 

“For providers, this means adapting to new administrative processes and ensuring systems are in place to manage the Two Pots efficiently,” she added. 

Naidoo added that retirement fund administrators have to ensure that by 1 September 2024, they are ready to be able to process claims and facilitate payments from the savings pot, which may require the development of new digital claims solutions and streamlined processes to deal with higher claims volumes. “Additionally, work is required in a number of other areas, such as ensuring statements and reports are amended to reflect the three new pots and their balances, ensuring resource capacity is sufficient to assist members, as well as assisting with the education for all stakeholders involved.” 

“Technology will play a crucial role in facilitating the transition to the Two-Pot Retirement System. Some providers are already investing in IT system enhancements and digital solutions to manage the complexities of the new system efficiently, including the significant increase in expected volumes, improving customer experience, and ensuring accurate tracking and reporting of the Two Pots for each member,” said Acton. 

“Old Mutual, for example, is updating its administration systems, implementing new claims processes, updating existing processes, and commencing with a far-reaching change management plan. This includes member communication and intermediary education for all our impacted retirement funds,” she continued. 

Naidoo also mentioned that “the Two-Pot retirement system is complex, and so it is vital that we help ensure that retirement fund members, employers and financial advisers have a good understanding of what the changes entails and the impact on members. There has, therefore, been significant focus on driving communications, education and training for all stakeholders involved and impacted.” 

“Additionally, we are working towards simple digital solutions that will help members make savings pot claims easily and efficiently. This involves planning, IT development and collaboration across numerous internal teams to ensure that the implementation thereof is successful,” Naidoo continued. 

Three major challenges

With a change as transformative as the Two-Pot Retirement System, Acton said there will be significant challenges. She highlighted three major ones: 

  1. New, unfinalised legislation - “Providers are implementing changes based on legislation that is not yet finalised, which introduces a significant amount of uncertainty. However, with the deadline of 1 September 2024 approaching, providers cannot wait for the legislation to be finalised. At this stage, we are building on what we know, understanding that until everything is gazetted and the fund rules are approved, it could change,” she said.
  2. A brand new claim type - “The introduction of the Two-Pot Retirement System results in a transaction capability providers have never had to cater for before. So, providers should build new digital, member-initiated claims capabilities to manage this,” she continued.
  3. Member education and awareness – “Correcting misconceptions due to mixed messages and information in the public about the Two-Pot Retirement System is a challenge. Providers, however, are rolling out massive member education and communication campaigns, with supporting tools to help members understand the details, including tax implications,” she added. 

Naidoo added that “the new two-pot retirement system requires a significant amount of work to ensure that as an administrator, we are ready for it on 1 September 2024. The biggest challenge that we foresee is members being unable to claim due to having incomplete or outdated member details on record, impacting the verification stage of the claims process. We have therefore been communicating with members, employers and financial advisers on the importance of keeping these member records that are shared with us complete and up to date.” 

Ensuring a smooth transition

In navigating these changes, Acton said some providers are currently ensuring that advisers are well-informed and equipped to guide customers through these changes. “We, for example, are focusing on customer education to ensure all members fully understand the new system and can make informed decisions regarding their retirement savings.” 

“Providers, however, are monitoring the legislative developments closely and taking steps to ensure that all necessary systems and processes are in place by the proposed effective date of 1 September 2024. The greatest risk, I believe, is the rule amendments, as providers will not be able to pay claims until all the Two-Pot Fund rules are amended with the changes. Providers cannot submit the rule amendments until the legislation is gazetted. If rules are not approved by 1 September, providers will not be in a position to pay claims until the Financial Sector Conduct Authority (FSCA) has approved the rules,” stated Acton. 

Acton concluded by saying collaboration with regulatory bodies, industry associations, and other stakeholders is essential for a smooth transition to the Two-Pot Retirement System. 

“Some providers are engaging in discussions and working groups to address potential challenges, seek clarity on legislative requirements, and share best practices to ensure that the industry is prepared for the changes, now and into the future post the implementation date for other reforms in the retirement industry,” she said. 

Naidoo said, “We anticipate a large number of savings pot claims just after 1 September 2024, so we are investing in improved technology and the use of digital solutions and process enhancements in ensuring that these claims are processed smoothly and efficiently, while ensuring it offers members a good client experience.”

“Whilst we are waiting for final legislation, we continue to engage with the relevant authorities, industry bodies and other stakeholders and understand the key aspects of the regulation and the intent behind the changes and are proactively preparing to be able to assist members with their claims on 01 September 2024. This collaboration has been on-going throughout the entire consultation process and the continuous discussions with the various parties have allowed us to provide feedback and input on the draft legislation at different stages and to ensure alignment in the industry and consistency in approach come 01 September 2024. We will continue to do so, as relevant,” concluded Naidoo. 

Writer’s Thoughts

Providers and advisers stand at the forefront of change as we usher in the Two-Pot Retirement System. The contributor’s insights underscore the need for proactive adaptation and member empowerment. By prioritising education, innovation, and collaboration, we can navigate challenges and pave the way for a more secure retirement future. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me - myra@fanews.co.za

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