Cape Town – President Cyril Ramaphosa has approved the Pension Funds Amendment Bill, enabling a new two-pot retirement system to boost retirement savings.
The Act amends several pension-related laws, introducing a savings withdrawal benefit and new account structures for pension funds.
From September 1, 2024, pension funds must adjust their rules and systems to allow members access to a portion of their savings.
“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 and the minimum withdrawal amount is R2 000. The ability to withdraw from the savings component will be applicable on a per fund or per contract basis,” the Presidency said.
President @CyrilRamaphosa 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. https://t.co/NOU7n7xPAt
— The Presidency 🇿🇦 (@PresidencyZA) July 21, 2024
Under the new system, one-third of contributions will go into a savings component, accessible at any time before retirement, and two-thirds into a retirement component, preserved until retirement.
Withdrawals from the savings component will be taxed as income.
The retirement component will be paid out as an annuity upon retirement.
This change aims to provide greater flexibility and access to retirement savings without requiring employment cessation or resignation.
“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, including a living annuity. This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds,” the Presidency said.
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Compiled by Betha Madhomu
