Old Mutual today welcomes the revised 2023 Draft Revenue Laws Amendment Bill made available for public comment on Friday. This is a significant step forward and brings much-needed clarity to several crucial grey areas, specifically concerning seeding and accessibility within the new regulatory framework.
Retirement Reform Executive at Old Mutual Michelle Acton said, most notably, the updated regulations would allow the industry to be in a better position to be ready by 1 March 2024, the date government expects the retirement funds to be prepared to implement the new laws.
“While the timeline is challenging, the release of the draft legislation and further confirmation of the 1 March 2024 effective date offers us clarity in constructing the intricate systems necessary for processing the appropriate claims. A considerable amount of effort is needed to ensure readiness, as entirely new and advanced automated systems must be developed to facilitate the efficient access of eligible portions of savings for fund members,” said Acton.
“Old Mutual fully supports these reforms, and we consider them to be pivotal, propelling us closer to achieving much better retirement outcomes for members,” she said.
The 2022 Draft Revenue Laws Amendment Bill was released in July last year for public comment. It proposed that the two-pot system will allow pension and provident fund members, as well as retirement annuity policyholders, to access a portion of their retirement savings before retirement age without resigning.
More importantly the new draft legislation provided certainty on seeding, defining the portion of current savings allowed to fund the accessible savings pot (now referred to as the savings component). The draft legislation now indicates that from 1 March 2024 a maximum of 10%, capped at R25,000, of the member’s existing savings will be used to seed the accessible pot.
“The industry has eagerly awaited the inclusion of the seeding element, which is now addressed in the draft legislation. The conditions suggested of a 10% limit, capped at R25000 mean that funds can seamlessly navigate any liquidity issues that may have arisen had the quantum been significant. We are confident that the manageable seeding will have minimal impact on the liquidity requirements of retirement funds,” added Blessing Utete, Managing Executive of Old Mutual Corporate Consultants.
Utete further emphasised that Old Mutual also welcomed the confirmation that provident fund members over 55 would have the option to stay and continue contributing to their current provident fund or to move to the new two-pot regime.
We are also heartened by the fact that retirement annuity funds which are underpinned by legacy fund member policies will have an option to apply for an exemption from the two pot reforms. “This is important because these policies were never designed to allow for access prior to reaching retirement age.
He added that the regulations stipulated that defined benefit funds would be accommodated. These funds do not refer to contributions made by a member to the defined benefit fund to determine benefits, but rather uses a defined formula to calculate benefits due to a member on retirement. To manage this the proposed legislation provides that the reference point for calculation of the member’s interests in defined benefit funds and the consequent adjustments thereto to facilitate the two pot reforms will be the relevant member’s pensionable years of service.
“We are encouraged with the process to date. Commentary closes on 15 July, so we anticipate these regulations will be gazetted early next year. Such certainty is invaluable to us, and we are much more comfortable now that we can move ahead full steam,” said Acton.