Get the latest facts and updates regarding the Pension Funds Amendment Bill 2024: Changes in Pensions and Allowances Coming This Year. The Pension system of South Africa comprises a tested benefit public benefit program, provident funds, and voluntary savings. The government has initiated the program to provide financial assistance for citizens to retire comfortably. However, certain amendments are made to pension funds, which are discussed in this article.
Pension Funds Amendment Bill 2024
On 16 May 2024, the National Assembly passed the Pension Funds Amendments Bill and sent it to the President for assent. The Pension Funds Amendment Bill results in the establishment of a Two-Pot Retirement System. The Two-Pot Retirement system will be effective from 1 September 2024.
In a two-pot retirement system, the savings of an individual will split into two parts that are retirement pot and the savings pot. The retirement contributions will only be received the retirement contributions from the date onwards of implementation. One-third of the total contributions will be deposited into the saving component, and two-thirds of the total retirement contributions.
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Changes in Pensions and Allowances
The provident funds and pension funds exist for the citizens’s benefit. If the employer has a fund, then it is mandatory for an employee to be a member of a fund if he or she has a fund. The savings and contributions of an employee will be provided to them for their comfortable retirement. Amendments in Pension Fund Laws allow an individual to make official withdrawals. A portion of retirement savings might be withdrawn by employees who make a contribution to their retirement funds.
As per the current legislative system, the members are not allowed to withdraw from their retirement savings until and unless they retire from their service. However, a fund member can make a partial withdrawal from the retirement fund prior to retirement under the two-pot system. A member can make a withdrawal once a year, and the withdrawal money must not be less than R2000. The amount will be available in the account and provide a benefit from tax-free growth in the account till the withdrawal is made.
Pension Funds Amendment Eligibility
The two-pot system is meant to offer financial assistance to fund members who are dealing with economic hardships. In various cases, fund members only have retirement savings, however, under the current system, fund members can access the retirement savings to pay off their debts, which is detrimental to financial planning. The saving component can only be accessed in dire needs and only by the entitled members, some of them are as follows:
- The Pension Funds Amendments are available for all retirement funds in both private and public sectors.
- It excluded the fund of non-participating members, including dormant, closed, liquidation, and beneficiary funds.
- The members who opt for the two-pot system and are 55 years and above on 1 March 2021 are considered entitled members of the scheme.
In addition, if the fund members contribute to the retirement funds over teh several years, such individuals are considered qualified members for the withdrawal of funds. However, to learn about the latest information regarding the two-pot system, the members must visit the official website of the SA government.
How to Claim Pension Funds
There is no as such claiming process for the provident funds, only the members have to be participating members of funds and contribute to the retirement components. However, the fund members must keep certain points in their mind, some of which are as follows:
- The members must ensure that their retirement fund has accurate contact details so that members would be updated in case any reform is implemented.
- The members must keep a watch for communication regarding reform implementation with retirement fund administrators or fund trustees.
- The withdrawal will be made from seeding capital on implementation. In case of any assistance, contact the administrator of the retirement fund.
In addition, if an individual is awaiting the amount of withdrawal from the saving component until retirement, the process will attract less tax.
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All We Know
On 31st August, the value of the fund, 10% or R30,000 or lower, will be allocated to the saving component and is referred to as seed capital. The process is a once-off transfer at the initial phase of the two-pot system and will not be repeated in future years.
The entire system ensures that the members should not resign the access part of retirement benefits if they are dealing with economic challenges. The members can make a partial withdrawal by preserving a portion that is only accessible to improve retirement outcomes.
Visitors must be updated on official websites and keep visiting this web page for further articles.
