Jurist South Africa president signs two-pot pension reform into law

[Dadparvar]

South African President Cyril Ramaphosa signed a new bill into law on Sunday amending the pension system in South Africa. The Pension Funds Amendment Bill enables the implementation of the new two-pot system “geared towards bolstering retirement savings.”

The bill amends the Pension Funds Act, the Post and Telecommunications-Related Matters Act, the Transnet Pension Fund Act and the Government Employees Pension Law to implement this new pension system. It enables individuals to use the new two-pot system by requiring 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.”

The new bill builds on the Revenue Laws Amendment Bill of 2023, which introduced the two-pot system. These changes will come into force on September 1, 2024, when a third of retirement payments will be added to a savings pot, and two thirds will be added to a retirement pot. Individuals will be able to withdraw from the savings pot prior to retirement, which will be subject to income tax.

Ramaphosa, commenting on the pension reform in June, stated:

While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households, the new retirement system offers protection and dignity to those who need it the most to overcome financial stress.

In a press statement made by the presidency earlier this year, it was said that “[t]he primary objective of the two-pot retirement system is to provide flexibility for fund members to access their retirement savings during emergencies, without necessitating resignation.” These legislative changes come partially as a response to the financial challenges seen during the COVID-19 pandemic. The legislation seeks to “strike a balance between long-term security and immediate needs, recognising life’s unpredictability.” It was further stated that this change reforms the “traditional retirement systems” that lack “the adaptability to address immediate financial crises.”

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