Big retirement shakeup coming soon

South African President Cyril Ramaphosa signed a law that will give savers early access to part of their retirement funds.

The president’s assent of the Revenue Laws Amendment Act establishes a so-called two-pot pension system that gives members access to their retirement funds without having to resign or cash out entire pension funds.

“The act requires pension funds to amend their rules, adjust their investment portfolios and prepare administrative systems for pension-fund members to apply to access portions of their pension funds” from 1 September, the presidency said in a statement on Sunday.

The National Treasury said in April it expects savers to withdraw about R28 billion from their pension funds once the system revamp is implemented.

Alexander Forbes, a South African pension fund administrator, said last month it expects R4.8 billion of outflows in the first year of the law being in force.

The signing of the legislation allows the Financial Sector Conduct Authority to approve changes to the rules of a retirement fund, which will enable the implementation of the two-pot system, the Association for Savings and Investment South Africa said. 

More than half of Asisa’s 867 members had submitted rule-change amendments to the regulator by last week, and most members are expected to have submitted their proposals by the July 31 deadline, Adri Messerschmidt, a senior policy adviser at Asisa, told reporters at a briefing in Johannesburg on Monday.