[imagesource:gencraft]

The government’s standing committee on Finance has once again changed the implementation date of the so-called two-pot retirement system.

Initially, the system was scheduled to be live on March 1, 2024, which caused some concern in the asset management community due to the short timeline for the new system.

In essence, the ‘two-pot’ system calls for up to one-third of all retirement funds to be placed in a “savings pot” that will be available before retirement under the new scheme. The remaining two-thirds of a pension fund will thereafter be transferred to a “retirement fund” that can only be accessed upon retirement.

This is intended to ensure that South Africans have access to some funds in an emergency while saving the majority of assets for retirement.

National Treasury has recommended that the new system come into effect by 1 March 2025, but after some heavy deliberation on the Revenue Laws Amendment Bill (RLAB), the Standing Committee on Finance voted that the system would go live on the original date of 1 March 2024.

Finance Minister Enoch Godongwana however wrote to Parliament to ask that the implementation date be moved to 1 September 2024, seeing as the Pension Funds Amendment (PFA) Bill needs to be passed before the changes to Revenue Laws Amendment Bill (RLAB) could be effected.

“Therefore, the effective date of the RLAB cannot predate the implementation of the PFA Bill. Given that the PFA Bill has not yet been tabled, there is a concern that the legislative process will not be completed by 1 March 2024,” the minister wrote.

“Even if both the PFA Bill and the RLAB can be promulgated by 1 March 2024, funds will then be required to amend their funds to be submitted to the Financial Sector Conduct Authority (FSCA) for registration, and funds ought to communicate proposed amendments to those fund rules and its impact to members.”

In a rare instance, the top three political parties agreed with the minister’s recommendation to only implement the changes on 1 September 2024.

Pension funds are of course important for our economy and allow investment in a range of assets, so it’s to be seen how allowing the withdrawal of a third of funds will impact not only the country but individuals as well. Perhaps the best advice has always been to not keep all your eggs in one pot.

Wealth Management experts like Consequence Private Wealth allow you to diversify your portfolio across a range of local and offshore retirement funding vehicles, so you are never at the mercy of a single fund. Their Consequence Model Portfolios blends together carefully selected fund managers with proven track records, to ensure your wealth grows in line with your retirement goals.

[source:businesstech]