On 21 July 2024, the president of South Africa assented to the Pension Funds Amendment Bill, which amongst others, enables the implementation of the two-pot retirement system as part of the broader framework of Pension Funds Law in South Africa.

The two-pot system is composite of a retirement component and a savings component (pots) which receive contributions. From 1 September 2024, one third of contributions will be allocated to the savings component and two thirds will be allocated to the retirement component. A member of a fund will be able to access the savings component at any time with no maximum withdrawal limit imposed, however, a minimum withdrawal amount of R2000 is in place and members are only allowed one withdrawal in a tax year. Fund members cannot make withdrawals from the retirement component and cannot have access to this component upon resignation from employment. The retirement component can be accessed in the form of an annuity at retirement age.

Importantly, fund administrators have to amend their rules, and adjust administrative frameworks in order to give effect to the two- pot system before the new legislation takes effect on 1 September 2024. In addition, the Financial Sector Conduct Authority (FSCA) has extended the deadline for Fund administrators to submit outstanding rule amendments to 31 July 2024. Failure to submit on time will result in the approval and registration of Fund withdrawal rules being subject to FSCA service level agreements, resulting in further delays for fund members in being able to access portions of their retirement funds.

Considering the above, retirement funds need to ensure that their rules accord with the new two-pot retirement system and are approved by the FSCA. Similarly, Retirement Funds need to update their administration systems and allocate the seed capital into the savings pot before any withdrawals can take place. Large volumes of applications in the initial stages of implementation may result in some delays.