The Financial Services Tribunal has reaffirmed that the introduction of the two-pot retirement system did not expand early-access rights for retirement annuity members in respect of their vested components, and those amounts remain subject to the pre-1 September 2024 fund rules.
The ruling came in a reconsideration application against a determination of the Pension Funds Adjudicator concerning the South African Retirement Annuity Fund, administered by Old Mutual.
Baagile Joseph Mvula’s RA policy was issued on 1 November 2002 and was made paid-up in February 2008. The fund credit was R45 418.50 on 4 October 2024.
Following implementation of the two-pot system on 1 September 2024, his benefit was divided into a savings component, a retirement component, and a vested component. He received R4 205.70 from the savings component on 12 October 2024.
He thereafter sought payment of the remaining balance of R42 623 – allocated to the vested component.
The Fund declined, stating that in the case of a RA, benefits are payable only from age 55, unless one of three exceptions applies: permanent disability, a total benefit below R15 000, or formal emigration with the required documentation. None of these applied.
The Adjudicator dismissed the complaint in October 2025, prompting Mvula to file a reconsideration application.
Mvula contended that:
- The vested component must remain governed by the legal and tax regime applicable before 1 September 2024.
- Prior to the reform, RA funds permitted certain once-off or partial withdrawals, and those rights continued to apply.
- The 10% seed-capital allocation from the vested component to the savings component showed that the vested component operated as an active transfer mechanism rather than a preserved fund.
- Applying what he characterised as post-reform restrictions to the vested component was inconsistent with the purpose and intent of the Revenue Laws Amendment Act, 2024.
In substance, he argued that the vested component remained accessible under the pre-reform framework, and the Fund and the Adjudicator had applied the wrong legal approach.
Tribunal’s reasoning
The Tribunal set out the statutory and contractual framework governing retirement funds, emphasising the relationship between a fund and its members is governed by the fund’s rules, the relevant legislation and the common law, and the rules are binding.
It focused on Rule 8.5 of the Fund’s Rules – the rule governing the vested component – which provides that:
- The vested component consists of the member’s interest immediately prior to 1 September 2024, less any allocation to the savings component; and
- The member’s interest in the vested component “is subject to and must be paid in accordance with the rules that existed immediately prior to 1 September 2024”, with the pre-implementation tax regime applying.
The Tribunal held this wording required the vested component to be administered in accordance with the pre-reform rules applicable to RAs.
It found that, under those Rules, a member of an RA fund may access benefits only upon reaching retirement age (55), or if specific exceptions apply (permanent disability, a benefit value below R15 000, or formal emigration). Mvula did not meet any of these requirements.
The Tribunal rejected the contention that the two-pot system amended or expanded early-access rights in respect of RAs. It found that the reform introduced limited annual access to the savings component but did not alter the qualifying events for accessing vested RA benefits.
It further held that the once-off allocation of seed capital to the savings component formed part of the transitional mechanism and did not change the character of the remaining vested amount or render it independently accessible.
The Tribunal concluded that the Adjudicator had correctly applied Rule 8.5 and the transitional provisions of the two-pot system. It found no basis to interfere with the determination.
Mvula will be entitled to the vested component of his RA only upon reaching the stipulated retirement age of 55 years, subject to the applicable rules.
