President Ramaphosa Signs Pension Funds Amendment Bill

President Cyril Ramaphosa on Sunday signed the Pension Funds Amendment Bill, which updates several pension laws to introduce a new two-pot retirement system aimed at improving retirement savings.

The new law changes the Pension Funds Act of 1956, the Post and Telecommunications-Related Matters Act of 1958, the Transnet Pension Fund Act of 1990 and the Government Employees Pension Law of 1996.

It adds new features like the savings withdrawal benefit and defines how members can access and manage their retirement savings. Pension funds will need to update their rules, adjust their investments and set up systems to allow members to access parts of their funds starting 1 September 2024.

This new law works alongside the Revenues Laws Amendment Act - signed by the President on June 11 this year - which supports the introduction of the two-pot retirement system. Starting from Sept. 1, one-third of retirement contributions will go into a savings account while two-thirds will be placed in a retirement account.

"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," he said, SA News reported.

The president added, "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."

Withdrawals from the savings component will be added to the individual's taxable income and taxed at their marginal tax rates.

From Sept. 1 onwards, retirement funds will need to set up a new part called the retirement component within the existing fund. People will need to contribute two-thirds of their total retirement fund contributions to this new retirement component.

The assets in the retirement component must be kept until retirement, meaning withdrawals can only be made when the member retires, according to the fund rules.

When a member reaches retirement age, the retirement component must be paid out as an annuity including a living annuity. This allows members to access their retirement savings without needing to resign or withdraw their entire pension fund.

Last month, Ramaphosa signed three bills into law under Section 79(1) of the Constitution including the National Land Transport Amendment Bill, the Economic Regulation of Transport Bill and the Municipal Fiscal Powers and Functions Amendment Bill.