The latest two-retirement system draft legislation is a significant step forward and brings much-needed clarity to several crucial grey areas, Old Mutual says.
National Treasury released the revised 2023 Draft Revenue Laws Amendment Bill for public comment on 8 June.
Read: Latest proposals on how the two-pot retirement system will work
The updated legislation will allow the retirement industry to be in a better position to be ready by 1 March 2024, when the government expects the industry to implement the new system, said Michelle Acton, Old Mutual’s retirement reform executive.
“While the timeline is challenging, the release of the draft legislation and further confirmation of the 1 March 2024 effective date offers us clarity in constructing the intricate systems necessary for processing the appropriate claims. A considerable amount of effort is needed to ensure readiness, as entirely new and advanced automated systems must be developed to facilitate the efficient access of eligible portions of savings for fund members,” Acton said.
The new draft legislation provides certainty on seeding, defining the portion of current savings allowed to fund the accessible savings component. The draft legislation states that from 1 March 2024, 10%, capped at R25 000, of a member’s existing savings may be used to seed the savings.
Read: This is how much you will be able to transfer to your savings pot on 1 March 2024
“The industry has eagerly awaited the inclusion of the seeding element, which is now addressed in the draft legislation. The conditions suggested of a 10% limit, capped at R25 000, mean that funds can seamlessly navigate any liquidity issues that may have arisen had the quantum been significant. We are confident that the manageable seeding will have minimal impact on the liquidity requirements of retirement funds,” said Blessing Utete, the managing executive of Old Mutual Corporate Consultants.
Other aspects of the new draft legislation welcomed by Old Mutual are:
- Granting “legacy” retirement annuity funds the option to apply for an exemption from the two-pot system. “This is important because these policies were never designed to allow for access prior to reaching retirement age,” Utete said.
Read: Treasury wants to exclude these ‘legacy’ RA funds from the two-pot system
- The confirmation that provident fund members over 55 will have the option to continue contributing to their current provident fund or move to the two-pot regime.
- Accommodating defined-benefit funds in the two-pot system.
“We are encouraged with the process to date. Commentary closes on 15 July, so we anticipate these regulations will be gazetted early next year. Such certainty is invaluable to us, and we are much more comfortable now that we can move ahead full steam,” Acton said.
“Old Mutual fully supports these reforms, and we consider them to be pivotal, propelling us closer to achieving much better retirement outcomes for members,” she said.
Just some info so say you have 275K In provident fund you will only be allowed 10% or 25k out
or is in one thrid on 275k ? dont understand this.
The seeding, which is the portion of your existing (pre-two pot) savings you can transfer to the savings pots, is 10% capped at R25K. From 1 March 2023, one-third of your contributions made from that date will go into savings pot. You can withdraw whatever is in your savings pot once a year.
So i wont be able to take on thrid of the 275k
As is currently the case, the only way to access your vested (pre-two pot) savings before retirement is to resign.