Zelda Damons
IMPLEMENTATION OF THE NEW RETIREMENT SYSTEM
On 9 June 2023, the National Treasury and SARS published the revised Draft Revenue Laws Amendment Bill and Draft Revenue Administration and Pension Laws Amendment Bill to commence from 1 March 2024 to implement the so called “two pot” or “two component” retirement system.
What is the aim of the “two component” retirement system?
- To assist those members to a pension/provident fund who are cash strapped and are unable to pay their debts and allow them to have access to their pension/provident fund prior to retirement or withdrawal from the fund on termination of employment as opposed to members having to consider resigning from their employment to have access to their retirement funds; and
- To deter those members who withdraw from the pension/provident fund from depleting all their funds prior to retirement but to allow them to preserve a portion of their retirement funds for when they do reach retirement age and are no longer in the employment market.
Many households are struggling financially and when a member resigns and receives his/her retirement payout, the first thing that comes to mind is to settle current debts, such as home loans, vehicle repayments, credit cards and other debts. Preserving a portion of the funds then becomes an unachievable plan.
How will the new retirement system work?
As from 1 March 2024, members will have access to:
- one-third of their retirement payouts prior to retirement; and
- two-thirds of their retirement payouts on retirement
How to make public comment regarding the proposed draft BillsThe public must submit written comments to the National Treasury on the draft Bills by close of business on 15 July 2023 to the National Treasury at 2023AnnexCProp@treasury.gov.za and SARS at acollins@sars.gov.za
