As the final quarter of 2025 unfolds, South Africa’s retirement fund sector finds itself at a pivotal moment, shaped by sweeping legislative and regulatory reforms. In August, National Treasury released 2025 Draft Taxation Laws Amendment Bill (TLAB), for public comments which were due by 12 September 2025. At the same time, the Standing Committee on Finance in the National Assembly released the 2025 Draft Revenue Laws Amendment Bill (RLAB), for a last round of public comments.
Taxation Laws Amendment Bill 2025 (TLAB)
The key proposals affecting retirement funds:
1. Clarifying tax treatment of death benefits
To address inconsistencies in the 2024 Tax Laws, the draft bill confirms that lump sum death benefits from any retirement fund component will be taxed as retirement fund lump sums, not as ordinary income. This approach ensures that beneficiaries retain the flexibility to choose between receiving a lump sum or an annuity, while still benefiting from the preferential tax rates applicable under the retirement and death lump sum tax tables.
2. Savings withdrawal on membership termination
Members will now be allowed to withdraw their savings component balance upon termination of membership, even if:
The amount is less than R2,000, or
A savings withdrawal was already made in the same tax year.
This change enhances membership and simplifies fund administration.
3. Divorce awards under religious tenets
Following changes to the Pension Funds Act in 2024, the draft TLAB proposes aligning the Income Tax Act to accommodate religious divorce orders (for example, Muslim marriages). This will ensure consistent tax treatment for amounts allocated to former spouses under religious tenets.
4. Exemption for child maintenance payments
The TLAB seeks to reinstate the exemption for child maintenance payments made from after tax income, which was inadvertently removed in 2008. These payments will no longer be taxed in the hands of the recipient. Note: This does not affect maintenance payments made by retirement funds.
5. Cross-border retirement income
The draft proposes removing the exemption for foreign retirement income received by South African residents. Unless a double taxation agreement (DTA) applies, such income will now be taxable in South Africa, ensuring alignment with the residence-based tax system and preventing revenue loss.
On 23 September, National Treasury held public consultations on the proposed retirement fund reforms. Most of the changes were well received by the industry. However, one proposal, the removal of the tax exemption for foreign retirement income received by South African residents sparked strong debate. Stakeholders raised concerns about the possible impact on the economy.
South Africa is a popular retirement destination for many expatriates who return with foreign pensions and spend them locally, contributing to the economy through everyday purchases and VAT. Removing the exemption could make South Africa less attractive for retirement, leading some expats to leave. This could reduce local spending and weaken the economic benefits the proposal is meant to support.
The effective dates for the proposed amendments vary, with some changes set to apply retrospectively from 1 September 2024 to align with the implementation of the two-pot retirement system.
Draft Revenue Laws Amendment Bill 2025 (RLAB)
The 2025 RLAB introduces targeted amendments to the Income Tax Act (ITA) and the Revenue Laws Amendment Act (RLAA) of 2024, primarily to support the implementation and refinement of the two-pot retirement system.
Key proposals include:
1. Seeding date clarification for provident funds
The Bill clarifies the calculation of the seeding amount for members of provident and provident preservation funds who were 55 or older on 1 March 2021. It introduces flexibility by allowing the seeding date to be either 31 August 2024 or the last day of the election month, as per fund rules. This aims to ensure consistency and certainty for both members and administrators.
2. Maintenance deductions alignment
Amendments to the definition of “member’s interest” ensure that section 37D maintenance claims are applied proportionally across all three components of the two-pot system. This provides clarity and consistency in how maintenance deductions are handled alongside other statutory deductions.
3. Definition of retirement annuity fund
The Bill corrects the definition of “retirement annuity fund” to explicitly refer to the total member’s interest, aligning the terminology with the objectives of the retirement reform and ensuring uniform application across fund types.
The Select Committee on Finance, having considered and examined the Revenue Laws Amendment Bill 2025, accepted the Bill. This means that we should see the RLAB 2025 promulgated very soon.
Conduct Standard 2 of 2025: For pension fund benefit administrators
The FSCA Conduct Standard 2 of 2025, which replaces Board Notice 24 of 2002, was officially published on 6 August 2025. While the Standard came into effect immediately upon publication, the FSCA has adopted a staggered implementation approach to ease the transition for pension fund benefit administrators. The Standard aims to enhance member protection and improve service delivery through:
- Fit and proper requirements for administrators and key personnel.
- Mandatory complaints management frameworks aligned with Treating Customers Fairly (TCF) principles.
- Stricter oversight of service level agreements and outsourcing arrangements.
Key transitional provisions:
Immediate effect: Certain provisions, including governance obligations and complaints management frameworks, became effective on 6 August 2025.
Phased implementation: Other requirements will be phased in over a 6 to 12-month period, allowing administrators time to adjust systems, policies, and procedures.
Repeal timeline:
Paragraphs 5 to 13 of Board Notice 24 of 2002 were repealed immediately.
Paragraphs 1 to 4 and 14 are scheduled for repeal in August 2026, completing the full transition.
Relaxations to support transition:
To reduce the compliance burden, the FSCA has:
- Removed the R 3 million capital adequacy threshold.
- Relaxed certain auditing and assurance requirements.
These transitional arrangements reflect the FSCA’s recognition of the operational and financial impact of the new Conduct Standard and its commitment to a fair and practical rollout.
Governance & cybersecurity update for retirement funds – Issued by the FSCA & Prudential Authority
The FSCA and Prudential Authority have issued Joint Communication 3 of 2025, outlining how financial institutions must report material IT and cyber incidents under Joint Standard 1 of 2023 and Joint Standard 2 of 2024. Retirement funds and benefit administrators are included in the list of financial institutions, who must report material IT and cyber incidents.
Included in the communication are the following:
Draft Joint Notice: Sets out the form, manner and timelines for incident reporting.
Reporting template (Excel):
Initial Notification – within 24 hours of identifying a material incident.
Follow-up Report – within 14 days with detailed impact analysis.
Final Report – submitted after full investigation (timing agreed with regulator).
Comment template: For submitting feedback on the draft documents, which were due on 5 October 2025.
These standards aim to improve incident response, governance and resilience across the financial sector. Institutions must ensure internal systems are ready to comply with the new reporting framework.
Q4 2025 marks a transformative phase for South Africa’s retirement fund industry with regulatory reforms gaining momentum and tax policy shifts on the horizon. Trustees, administrators and members must remain agile, informed and proactive. This update serves as a guide to navigating the evolving landscape and preparing for the challenges and opportunities ahead.
