Two-pot retirement system update
The Taxation Laws Amendment Act 2024 and Revenue Laws Amendment Act 2024
These Acts were gazetted on 24 December 2024 and include the following two-pot related changes, which are effective 1 September 2024:
- Removing the requirement to obtain a directive for intra-fund transfers.
- Clarify that the cease to be resident requirements apply to all retirement funds except for the vested components of the pension and provident funds and to all savings components.
In the Parliamentary meeting, National Treasury (NT) stated that a non-resident member is allowed to make a once-off withdrawal during their membership of up to the full value in the member’s interest in the vested component in the pension preservation or provident preservation fund, but only if the member has not previously accessed the value in the vested component during the membership in the preservation fund.
3. Clarify that amounts that are allowed to be deducted from a benefit in accordance with section 37D of the Pension Funds Act, including maintenance order claims, are proportionally deducted from each component.
4. Clarify that the retirement benefit calculation must be performed at a fund level and not per contract within a fund. However, the seeding amount is calculated at contract level.
5. Clarify that the R15 000 threshold for a lump sum withdrawal from RAs is calculated against the combined value of the retirement component and the vested component.
6. Allowing for purchasing of annuities directly from the savings component at retirement.
7. The less than R2 000 benefit in the savings component is changed to allow any member to take the savings component benefit when they exit the fund and not only as a second withdrawal, this is to ensure that small balances are not left in the fund.
8. Clarify the two-pot changes do not apply to
– A fund where a liquidator has been appointed in terms of the PFA before 31 August 2024
– A fund with no member assets immediately before 1 September 2024
Seeding date and opt-in in for provident fund and provident preservation members over age 55 on 1 March 2021 – Draft Revenue Laws Amendment Bill 2025 comments were due by 17 January 2025
The wording in the RLAA 2024 does not achieve the flexibility required and NT published the draft RLAB 2025 to clarify the stated intention:
9. For members of provident funds and provident preservation funds who were 55 years old on 1 March 2021 the seeding date and calculation method allows for some level of flexibility to ensure alignment between the law and fund rules, therefore the seeding calculation date is either as at 31 August 2024 or the last day of the month the member elected to opt-in – as per the registered rules of the fund.
10. The registered rules of the provident fund preservation fund will apply to determine whether or not the over 55 member had to be a member of the same provident preservation fund of which they were a member on 1 March 2021 in order to be excluded from the two-pot system.
Amendments to FSRA Conduct Standard 1 of 2019 – section 14 transfers
These amendments address the changes required for alignment with the two-pot changes and was tabled with Parliament on 7 November 2024. It is expected that the amendments will be made final early in 2025.
As an interim measure the FSCA issued a general exemption (FSCA RF NOTICE 18 of 2024) effective from 1 September 2024, exempting retirement funds from the use of the forms still prescribed in the current S14 Conduct Standard, subject to the use of the new revised forms as are to be determined once the amendments to the Conduct Standard comes into effect.
FSCA RF Notice 25 of 2024: Determination of Format and Manner of Regulation 28 Quarterly Non-Compliance Reports – published 10 December 2024
RF Notice 8 of 2024 was issued in respect Prudential Standard 1 of 2024 and determined the format required for the Regulation 28 quarterly non-compliance reporting – this was required to align with the changes made to Regulation 28. Some items were erroneously excluded from the tables contained in Annexure A to the Schedule of RF Notice 8, and this RF Notice 25 includes the updated format of the report and replaces the previous version.
The draft holistic reporting Prudential Standard, published for comments on 14 November 2023, is still under development.
OPFA – Policy on Expedited Complaints and Vulnerable Complainants – published 12 December 2024
The OPFA has published its Policy on Expedited Complaints and Vulnerable Complainants, which is effective from 12 December 2024. This Policy provides guidelines on how the OPFA will identify vulnerable complainants and complaints that may be expedited. It outlines the processes and protocols to assist vulnerable complainants whose complaints are to be expedited. The OPFA will use the following category of complaints as a guide to identify complaints to be expedited:
Draft General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Bill, 2024 – published 19 December 2024
The draft Amendment Bill aims to demonstrate South Africa’s commitment to strengthening its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) system by addressing the remaining deficiencies identified by the Financial Action Task Force (FATF) mutual evaluation in 2021 and to better prepare South Africa for the next mutual evaluation to be conducted in 2026/27. The draft Amendment Bill proposes the following changes:
What to expect during 2025
COFI Bill
The COFI Bill is expected to be submitted to Parliament in early 2025. NT received the SEIAS (Socio-Economic Impact Assessment System) certificate on the COFI Bill. The State Law Advisers is expected to sign off on the Bill in January/February 2025 and Cabinet approval is expected in February/March 2025. Thereafter the Bill will be tabled in Parliament.
Late Payment Interest (LPI)
Following on from FSCA Conduct Standard 1 of 2022 (RF), FSCA Communication 15 of 2023 (RF) and the OPFA Communication 1 of 2024 – which deal with the calculation of the late payment interest by pension funds in terms of s13A of the PFA, the FSCA and OPFA have met on to discuss this issue. The FSCA has indicated that it will be issuing a communication / guidance note in early 2025 to clarify the date from which LPI must be calculated.
Conduct Standard – requirements pertaining to section 13B (pension fund benefit) administrators
The FSCA has taken a decision to progress this draft Conduct Standard as problems in the section 13B administrator environment persist and are exacerbated by the lack of an appropriate framework. A watered-down version of the Conduct Standard that addresses the main risks but avoids, as far as possible, potential misalignment with the future frameworks under development, has been finalised and will be submitted to National Treasury for onforwarding to Parliament.
Conduct Standard regarding industry practices and treatment of lost accounts and unclaimed assets
Following on from the FSCA Response To Comments On Discussion Paper published in March 2024, it is expected that the draft Conduct Standard will be published for public consultation during 2025. The Conduct Standard is expected to focus on developing a framework for the identification, monitoring, tracing and reporting to the FSCA of all unclaimed assets.
Conduct Standard for Financial Consumer Education
The initial draft Conduct Standard was published for public consultation in March 2023. The FSCA held its Financial Education Summit in August 2024 and published its draft Commitment Charter for Financial Education in November 2024. It is expected that the final version of this Conduct Standard will be published during 2025.
FSCA’s Consumer Vulnerability Framework
In March 2024 the FSCA published its Statement on Consumer Vulnerability and consultations were held during 2024. Protecting customers through ensuring their fair treatment is a key mandate of the FSCA and vulnerable customers require specific consideration. During 2025 the FSCA will be engaging with stakeholders to establish current practices towards consumer vulnerability. The information gathered on the current practices will assist with identifying gaps in the market, refining the definitions of vulnerability and developing the FSCA’s expectations of financial institutions regarding vulnerability.