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Key tax law changes for intermediaries: practical tips to help your clients thrive

ARTICLE BY

  • FIA Employee Benefits Executive Committee

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Following the enactment of key tax legislation – including the Revenue Laws Amendment Act, 2025 (assented to in December 2025), alongside the subsequent Taxation Laws Amendment Act and Rates and Monetary Amounts Amendment Act (both assented to in April 2026) intermediaries now have essential legal clarity, as well as client-friendly adjustments to retirement fund rules.

While many of these updates build upon the Two-Pot Retirement System, they introduce critical refinements and technical clarifications affecting seeding, emigration, death benefits, divorce-related assignments, and fund exit scenarios.

Here is what advisers should know:

Seeding and Transfer Clarifications

Several practical improvements have been made regarding the seeding of the savings component and related transfers:

  • No tax directive required for the initial seeding amount transfer or any subsequent sweeping of amounts into the retirement component. The South African Revenue Service (SARS) has already adopted a purposive approach in their Business Requirements Specification (BRS), removing previous administrative hurdles. This sweeping mechanism is a systems-driven backend process handled directly by the fund administrator in accordance with their registered fund rules. It does not require a manual instruction or transactional request from the client
  • Multi-Fund Transfers Deferred: Intermediaries should note that transfers to multiple funds remain unpermitted. Although industry stakeholders requested the reinstatement of multi-fund transfers during consultations on the 2025 Revenue Laws Amendment Bill (RLAB), National Treasury did not include this in the final Act, indicating it will only be considered in future legislative cycles.

Over-55 Provident Fund Seeding Date Clarifications: The statutory 12-month opt-in window remains firmly in place under proviso (iii) to the definitions of both the retirement component and savings component. The recent amendments do not extend this 12-month timeframe; rather, they clarify rule application around seeding dates, confirming funds may utilise either 31 August 2024 or the last day of the month in which the member elected to opt in, depending on registered fund rules. For over-55 provident fund members, opt-in discussions should occur within broader retirement planning or benefit-event conversations, with advisers carefully explaining the impact on access, preservation, and post-retirement income where members raise queries.

Adviser Tip: These changes significantly reduce red tape and improve client outcomes. Remarkably, trend data from major administrators highlights that while the introduction of the Two-Pot framework has spurred a massive surge in member engagement and financial education, withdrawal behaviour remains aggressive. Data from one major administrator reveals that of the fund members who choose to withdraw from their savings pot, roughly 93% empty the available balance completely rather than taking a partial, measured emergency amount. Use your broader retirement planning and opt-in conversations to actively counsel clients on the severe compound growth they are permanently forfeiting by draining their pots.

Access to Vested Benefits in Preservation Funds on Emigration

  • Effective Date: 1 March 2026 (for years of assessment starting on or after that date).

The legislation provides statutory clarification surrounding vested rights in preservation funds, confirming that the three-year waiting period for the vested component applies in limited scenarios:

  • Where the client has already utilised their single allowed pre-retirement withdrawal from that vested component, or
  • Where the client retired from employment and subsequently transferred the retirement interest into the preservation fund.

This relief does not extend to the vested component of retirement annuity funds, which remain subject to the strict three-year rule.

Adviser tip: For clients planning to emigrate, review their fund type and withdrawal history. Preservation fund members who haven’t yet taken a vested withdrawal (and didn’t transfer post-retirement) now have clarity that they may access funds without waiting the three-year period out. Use this as an opportunity for structured emigration planning conversations, including tax and exchange control implications. This change does not alter exchange control or residency cessation requirements, which must still be considered as part of any emigration strategy.

Full Savings Pot Access on Fund Exit (Resignation or Dismissal)

  • Effective Date: 1 March 2026.

Clients terminating fund membership (via resignation, dismissal, or retrenchment) can withdraw the remaining balance of their savings component upon exit, even if they already executed a savings withdrawal earlier in the same tax year. In these fund exit scenarios, the standard R2,000 minimum withdrawal threshold is waived.

Adviser tip: With a growing cost of living crisis, this is a practical win for clients leaving employment. However, do not assume that financial distress is isolated to lower-income brackets. A significant volume of early applications came from high-earning individuals – including those earning over R140,000 per month – who chose to access their savings pots despite being hit with a maximum 45% marginal tax rate. When assisting with exits, clearly explain the long-term implications of taking the full savings pot in cash. Remind clients that taking immediate cash will incur harsh tax liabilities at their marginal rate and heavily erode the retirement capital they can transfer to a preservation fund or a new employer’s fund.

Critical distinction for advisers – This allowance for a second savings withdrawal in a single tax year applies exclusively when exiting the fund completely. If a resigning client elects to make their retirement benefit paid-up or transfer to a preservation structure rather than taking a complete exit payout, they cannot access this second savings withdrawal.
Reach out to the FIA Employee Benefits Executive Committee (Exco) for more detailed notes unpacking the operational and rule amendment implications.

Tax Clarity for Non-Member Spouses in Unregistered Religious Marriages

  • Deemed effective date: 1 September 2024 (Retrospective legislation).

The amendments now align the Income Tax Act with recent Pension Funds Act changes. This properly recognises the assignment of retirement interests to non-member spouses following the dissolution of marriages under religious tenets (such as Muslim or Hindu marriages), providing clearer tax treatment on court-ordered divisions.

  • Retrospectivity: Because the Two-Pot framework officially launched on 1 September 2024, this effective date is intentionally retrospective to ensure that religious marriage dissolutions are treated with fairness from the very inception of the new system.
  • Valuation Date Reminder: For the purposes of calculating the assigned amount, the “pension interest” value is determined as at the date of the divorce court order or official decree of dissolution, rather than the separation date.

Adviser tip: While recognised customary marriages have long enjoyed statutory protection, you must now ensure that divorce or separation planning for clients in previously unrecognised religious marriages fully accounts for these assignments. In the past, legal and employee benefits consultants frequently encountered tragic scenarios where clients resorted to “desperation divorces” or counter-intuitive corporate resignations purely as a clumsy, destructive mechanism to unlock fund liquidity during family crises (a practice that still happens when financial desperation outstrips the available savings cap). This amendment finally brings equitable, structured tax relief to religious marriages, completely removing the administrative uncertainty that used to hold up fund deductions and tax reporting.

Consistent Tax Treatment for Death Benefits from the Savings Component

  • Effective date: 1 September 2024 (Retrospective legislation).

Death benefits paid as lump sums to nominees or dependants from all three components (savings, vested, and retirement) will now be taxed according to the retirement fund lump sum benefits table. This resolves previous legislative silence regarding the savings component. Much like the religious marriage amendments, this date is backdated to 1 September 2024 to ensure consistent tax rules apply to all Two-Pot related death claims processed since the system went live.

Adviser tip: Update your beneficiary nomination and estate planning discussions. This change brings welcome consistency and potentially more favourable tax outcomes for dependants. Review existing nominations with clients to ensure their wishes align with the most tax-efficient structures.

These amendments reflect valuable industry feedback and aim to reduce friction for fund members during key life events and transitions. As intermediaries, your proactive guidance on timing, options, and tax implications will be instrumental in helping clients navigate these changes effectively.

We will continue to provide deeper insights in future communications on this and other pertinent topics affecting the employee benefits landscape. Should you need any clarification or support in communicating these changes to your clients, please reach out.

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