President Cyril Ramaphosa has finally singed the Pension Funds Amendment Bill into law. Popularly known as the two-pot system, it is aimed at cushioning
the financially burdened workers by allowing them to withdraw a portion of their retirement funds.
“President Cyril Ramaphosa has assented to the Pension Funds Amendment Bill which amends pension-related legislation to enable the implementation of the recently legislated two-pot retirement system, geared towards bolstering retirement savings. The law provides for the introduction of the savings withdrawal benefit, the appropriate account of a member’s interest in the
savings, retirement and vested components, and the deductions that may be made.
The Act requires pension funds to amend their rules, adjust their investment portfolios and prepare administrative systems for pension fund members to apply to access portions of their pension funds from 1 September 2024,” said Ramaphosa spokesperson,
Vincent Magwenya.
According to Magwenya, one-third of retirement contributions will be split into a savings component and two-thirds into a retirement component.
“What is in the savings component will be available for withdrawal at any time before retirement. The ability to unconditionally access amounts from the savings
component will be provided without the member having to cease employment or having to resign. A member will be allowed to make a single withdrawal within a year
of assessment,” explained the spokesperson.
The minimum withdrawal amount is R2 000, but withdrawals be taxed at marginal tax rates. Magwenya said from retirement funds will from 1 September 2024,
be required to create another component known as the “retirement component”, which will be housed within the current retirement fund.
Individuals will be required to contribute an amount of two-thirds of the total individual retirement fund contributions to the retirement component.
“The assets in the retirement component will be required to be preserved until retirement, i.e. withdrawals from this component can only be accessed by the member upon retirement as per the fund
rules. Once a member has reached retirement age and retires, the retirement component is to be paid in the form of an annuity. This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds,” concluded Magwenya.
