Two-pot retirement system is live – but some may not be able to access their savings

JOHANNESBURG - As the highly anticipated two-pot retirement system is rolled out, some pension fund holders will have to pause their plans to withdraw savings early as administrators play catch-up on the rules.

Retirement funds were given until the end of July to apply for rule amendments that would allow them to implement the two-pot system.

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The two-pot retirement system took effect on Sunday, but some pension funds and administrators are yet to comply with the full requirements.

'GAPS IN THE RULES'

It’s all systems go for pension funds as cash-strapped consumers bet on their retirement savings to help fill financial gaps.

The retirement savings of South Africans have now officially been split into vested, savings, and retirement pots, which means pension holders will be able to access a portion of their retirement savings.

With the Pension Funds Amendment Act recently signed into law, fund administrators need to abide by new rules.

Despite the July deadline, Chief Director for Financial Sector Development at National Treasury, Alvinah Thela, said some pension funds still had to get their affairs in order.

“As of Friday, the Financial Sector Conduct Authority [FSCA] had approved 687 rule amendments; they have queried 151. This means 151 funds have submitted, but there are gaps in the rules that have been submitted for approval by the FSCA. Those need to be addressed.”

Thela said failure to abide by the new rules would have an impact on fund members.

“Members can still send through their claims, but those will not be processed.”

While the two-pot system is good news for pension holders, administrators have again warned of the tax implications and admin costs for consumers tapping into their savings.