Revenue Laws Amendment Act, No 12 of 2024 and the Pensions Fund Amendment Act, 31 of 2024 required retirement funds to split the members share of funds into essentially two ports. The savings pot consisted of what was called the seeding component and one third of every contribution from that date. The retirement pot consisted of two third of whatever the member had in a fund as of 01 September 2024 plus two thirds of whatever gets contributed by the member whenever contributions fall due.
The aim of the legislature was to respond to members immediate needs described as emergency circumstances. Should a member have an emergency, they would, once a year have access to their savings pot which they would simply apply for. Nobody needs to give them permission to access the money. All that is needed is for them to ask for the money. This change in the retirement funds landscape brought about some turmoil in the industry as well as some level of apprehension and excitement. The apprehension was that someone was going to have to pay for this change. The money to pay for this change was not going to fall from trees. We were worried that the money is going to reduce the members share without the members directly using the money. We were also worried that members were going to lose a lot of money to tax. The loss of money to tax happened with every withdrawal. It was sad to see but people had emergencies, and they shared their retirement savings with the South African Revenue Services. The fact that your two-pot withdrawal is seen as part of your annual income may increase levels at which the employee/member gets taxed. This may mean that during the tax assessment, the member pays even more. All these concerns came to pass, and we swallowed whatever good there was with the obvious bad.
Recently the Financial Sector Conduct Authority issued a report detailing just how much Retirement Fund members paid to the Pension Fund Administrators. The numbers are staggering. The Administrators pocketed R1.629 billion. On average each Pension Fund member paid some R252.00. Some members did not pay a cent if they did not withdraw from the savings pot. Some members paid as much as R3 072 per member to the administrators. In the Region A & B fund, where I serve as a trustee, we decided that members will only pay if they withdraw. We opted to keep the administrative fee constant, and we resisted any increase we got to know about in the other funds in the industry. It was not an easy fight as we were standing in the way of administrators who had identified an opportunity to increase their income. We resisted because we had a duty to satisfy ourselves as trustees that the cost was justified. We will continue being vigilant in our funds. We are delighted that we managed to keep the costs for our members such that they paid amongst the least in the country.
Keep saving and preserving if you can. Realities of life may force you to withdraw. You can only do so once a year. In our funds, that would be the only time you have to pay a two-pot withdrawal fee. You are free to choose what you want to do. In recent times, I have come to appreciate more the value of freedom. Use it wisely and take care.
Author: Mogomotsi Mark Mfikoe
National Director
