The retirement industry is progressing very well in getting itself ready for the introduction of the two- pot retirement system on September 1, Institute of Retirement Funds Africa (Irfa) president Geraldine Fowler said on Wednesday.
During parliamentary hearings the industry expressed concern about the short period of time it had been given to prepare for the introduction of the system after the promulgation of the laws. The Revenue Laws Amendment Bill, which provides for the system, was only signed into law by President Cyril Ramaphosa on June 1.
“I believe we are succeeding in getting ourselves ready,” she said at a media briefing. Irfa will hold an annual conference from October 6-8 in Cape Town. The conference will also focus on the introduction of the new retirement system and other challenges facing the sector across the continent.
Irfa represents about 60% (925) of the 1,541 registered retirement funds (as at July 2023 and excluding public sector funds) with assets under their management of about R2.4-trillion, or 76% of total industry assets.
“Everyone is nervous, everyone is scared: September 1 is looming, it is upon us. However, I can with certainty say that in all my many years in the industry, I have never seen role players, an ecosystem come together as I have seen with the two-pot system,” she said.
“Right from industry administrators, consultants, employers, asset managers, parliament, our regulators, Sars … everyone has come together to ensure that come September 1 we are ready as an industry.”
Fowler conceded that there would inevitably be hiccups but the industry was fully committed to the project. She said the industry had not seen a significant number of resignations ahead of the introduction of the two-pot system to access the full amount in a retirement fund.
According to the 2024 budget review, the Treasury estimated that R5bn would be collected in tax in the 2024/25 fiscal year as retirement fund members accessed the one-off withdrawals allowed by the two pot system after it takes effect. Irfa executive committee member Nancy Andrews was confident the R5bn would be collected but cautioned that it would take a bit of time and would not happen immediately.
The maximum amount that an individual can withdraw when their retirement fund is transferred to a savings pot is R30,000 or 10% of the accumulated savings held in a vested pot, whichever is the lesser. Andrews noted that the penalty tax on withdrawals may act as a disincentive in future years.
In terms of the two-pot system one-third of contributions will go into a savings pot which can be accessed once a year and the remaining two-thirds into a retirement pot which cannot be touched until retirement. After the first year of the two pot system, retirement fund members can withdraw the savings accumulated during the year — that is, the full savings pot.
Irfa executive officer Wayne Hiller van Rensburg said research indicated that the withdrawals would be small relative to the total assets under management of the industry.
Retirement fund administrator Alexforbes expects a retirement sector outflow of about R50bn when the two-pot system is implemented in September. It estimates that about 1% of the assets of the industry will be paid out in the first year of the system, or withdrawals of about R50bn from an industry with assets of about R5-trillion.
Irfa past president and executive committee member Enos Ngutshane said that the SA retirement industry had a lot to learn from other African countries about micro pensions, which cater for those in the informal sector.
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