Blessing Utete, the managing executive of Old Mutual Corporate Consultants, spoke to Mark Bechard, the managing editor of Moonstone publications, about National Treasury’s draft legislation for the two-pot retirement system.
Read: Treasury publishes draft two-pot retirement system legislation
The conversation, of about 30 minutes, covered the following:
- Is the draft legislation in line with what the retirement industry expected?
- How realistic is the implementation date of 1 March 2023?
- Why National Treasury has rejected proposals for members to seed their “savings pot”.
- Which retirement funds are included and excluded?
- How pre-retirement withdrawals from the “savings pot” impact a member’s one-third lump sum at retirement.
- Do withdrawals from the “savings pot” include both the member’s contributions and the employer’s contributions?
- How contributions to provident funds will be affected.
- The restrictions on transfers between “pots”.
- Savings in the “retirement pot” cannot be accessed until retirement.
- Tax deductions on retirement contributions.
- Tax implications for withdrawals from the “savings pot”.
- Will members still be able to make pre-retirement withdrawals from the “vested pot” after the implementation date if they quit their jobs?
- How will a divorce order be applied to a member’s retirement interest allocated across the three “pots”?
- Will members be able to access their savings in all three “pots” if they emigrate?
- Who will decide when and how often members can exercise their option to contribute to the “savings pot”?
- The main challenges facing trustees and administrators in implementing the two-pot system.
- Whether administrators should start changing their systems now before the legislation has been finalised?
- Will being able to withdraw from the “savings pot” once a year affect funds’ investment strategies?
- Whether members lose the option to transfer from one “vested pot” to another “vested pot” when they change jobs.
Click here to listen to the interview, which is also available on Moonstone’s YouTube channel.
Re the last point, my oversight, right at the end of the DRLA: “the member may, in accordance with the rules of the fund that exists immediately prior to 1 March 2023, elect to transfer the value of this pot into the member’s vested pot of another pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund;”
But the fact that NT did not refer to this option in their Explanatory Memo does suggest that this option will not be broadly advertised and that exiting members will be informed/encouraged to preserve/transfer to the current/ next employer’s retirement pot, without them fully understanding the consequences.