Parliament’s standing committee on finance has caused an upset in the retirement industry with its decision to change the implementation date of the two-pot retirement system from March 1 2025 to March 1 2024. This is not a simple matter but has serious implications for retirement funds.
Members of the committee justified this decision on the grounds that it is in the interests of financially distressed workers who have been waiting since 2020 to get access to some of their retirement assets. Without this access, workers all too often resign from their jobs to get their lump-sum pension payouts, only to become unemployed and destitute later.
In terms of the proposed two-pot system retirement fund members will have access to up to R30,000 when the system takes effect and be able to make one withdrawal from one of the pots each year thereafter.
The MPs have a valid point about workers’ needs and the expectations which were created when the Treasury first mooted some form of relief four years ago. MPs regard a further delay of a year as a step too far.
However, they gave insufficient consideration to the opposition by the Treasury and the retirement industry which have emphasised that a March 1 2024 implementation date is just not feasible as funds need to get their systems in place on the basis of a promulgated law. The SA Revenue Service (Sars) also needs to get its systems ready. These institutions will be the implementers of the new regime and their views should be given due weight.
In the view of MPs, a March 1 2024 implementation date would allow retirement funds to implement the new two-pot system as and when they are ready. Here again the industry has argued strongly against such a staggered introduction which would create an unlevel playing field and cause unhappiness among retirement fund members who do not yet have access to their funds. The Treasury also says it will be difficult for Sars to administer from a tax point of view.
It is possible, but unlikely, that finance minister Enoch Godongwana will persuade the committee to change its mind. In terms of the Money Bills Amendment Procedure and Related Matters Act any proposed parliamentary amendment to a money bill has to be submitted to the minister who has to respond within 14 days. But he does not have the power to reject the amendment, only express a view. The National Assembly cannot consider the bill without this response.
There is scepticism about whether the act can be promulgated before March 1 2024. The National Assembly and the National Council of Provinces has to adopt it and President Cyril Ramaphosa has to sign it into law. Parliament goes into a long recess over December and January which could delay matters. However, even if the bill is not promulgated before March 1 2024, it is legally possible for the act to have a retrospective implementation date.
The proposed two-pot system is a significant change to the retirement regime. The finance committee has signalled its care for struggling workers but care also needs to be taken with the implementation of the system to ensure a smooth transition and ensure that expectations are met and that no mistakes are made.
While the committee’s frustration with the delays is understandable, a last-minute rush is inadvisable. The retirement industry should not bear the consequences of the Treasury’s tardiness in finalising the proposed bill.
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