Chapter 5. The Proposed ‘Two‐pot’ Retirement system
The ‘Two-pot’ retirement system proposed in the 2022 Budget Review is a very necessary component of the retirement reforms that were initially introduced from 1 March 2016 with the standardisation of the taxation rules, and that were then taken a step further from 1 March 2021 with the harmonisation of the annuitisation of provident fund pay-outs.
The discussion that follows in this chapter of the workbook makes use of the following terminology:
• “Retirement Fund” is a generic term for Pension, Provident and Retirement Annuity Funds
• “Retirement Interest” (‘RI’) is the accumulated value of all contributions made to the fund plus investment growth and less administration expenses
• “Vested Right” is the right, usually created by legislation, to expect a certain outcome.
5.1 Background to Retirement Reforms
Post-retirement Preservation
Retirement Reforms have been in the spotlight for many years, going as far back as the Michael Katz Commission investigations at the start of the century (millennium  ).
Extensively researched, widely canvassed and in my opinion, handled with admirable transparency by National Treasury, these reforms will improve the quality of life of South African citizens in their later years.
This research resulted in the implementation of the following aspects of the retirement reform process:
1. From 1 March 2016:
The harmonisation of the tax calculation rules for contributions to retirement funds, and an improved tax deduction principle to encourage individuals to join a retirement fund and save for their retirement.
2. From 1 March 2021:
The preservation of the Provident fund retirement interest at retirement by annuitising (i.e., paying monthly annuity payments) what was previously a single lumpsum pay-out.
One of the planned reforms that has not yet been implemented is pre-retirement preservation.
Pre-retirement Preservation
Retirement fund members can currently access their pension or provident fund retirement benefit in full when they cease employment, and they also have a once-off option to withdraw any amount out of their pension preservation funds or provident preservation funds.
Information from retirement fund administrators and SARS indicates that early withdrawals of the retirement interest are taking place (sometimes by resigning from employment), despite the high tax rates that are applied.
The discussion paper entitled Preservation, portability and governance for retirement funds which was published on 21 September 2012, and the paper entitled 2013 Retirement reform proposals for further consultation which was published on 27 February 2013, both included options to increase the level of pre-retirement preservation.
This background brings us to the 2022 Budget proposals and the introduction of draft legislation during 2022 to provide for pre-retirement preservation.
5.2 Two-pot Retirement System – 2022 Draft Amendments
2022 Budget Proposal
The discussion paper entitled ‘Encouraging South African Households to Save More for Retirement’ was published in December 2021.
It outlines a set of reforms to enable pre‐retirement access to a portion of one’s retirement assets – while ensuring that the remainder is preserved for retirement. Public comments on the tax treatment of contributions to the two pots are being reviewed in preparation for public workshops, to be followed by legislative amendments.
Media Statement 29 July 2022
The 2022 Draft Revenue Laws Amendment Bill issued on 29 July 2022 contains key amendments on retirement reform to move towards a “two-pot” retirement system. The intention of the amendments is to enable South Africans to save for non-retirement purposes (e.g. emergencies) via their retirement funds, whilst preserving more of their savings for retirement.
These amendments aim to encourage members to preserve their retirement savings by making it more flexible to accommodate unforeseen pressures that members face during the span of their working life. It makes it possible for workers not to resign from their employment merely to access their retirement funds and would have assisted members during a crisis like the COVID-19 pandemic, when many employees faced reduced salaries or were not paid at all during that time.
The amendments are technically complex [Rob: You can say that again], as they attempt to fit a pre-retirement withdrawal scheme into an existing retirement savings vehicle primarily designed to cater for long term savings.
Explanatory Memorandum 29 July 2022 – Reasons for change
There are two primary concerns with the current design of the retirement system.
1. The lack of preservation of retirement savings before retirement.
For pension funds and provident funds, this access to retirement savings is dependent on an employee terminating employment. Individuals can then access their funds, in full, when changing or leaving a job.
2. Some households in financial distress have assets within their retirement fund(s) that are not accessible, even in case of emergencies. This worsened during and after the COVID-19 pandemic, with numerous calls for financially distressed individuals to be given immediate access to their retirement funds to alleviate financial hardship.
On 15 December 2021, Government published a discussion document entitled Encouraging South Africans to save more for retirement, which proposed a new retirement fund regime that aims to address both concerns – this in the form of a so-called “Two-pot” retirement savings system.
Individuals can contribute to a “savings pot” which is accessible (without resigning from their job), and a “retirement pot” which must be preserved until retirement (or death).
The aim is to have a system that will allow resources to be available when needed, but that will increase the level of savings that are dedicated to retirement.
The new two-pot system seeks to retain the principle of exempting contributions and exempting growth, while taxing withdrawals and benefits (EET).
The tax treatment for withdrawals will be amended, as the value of any withdrawals from the “savings pot” and annuity income from the “retirement pot” will be included in that year’s taxable income.
2022 Overview of the Two-pot Retirement System
In line with the details included in the discussion document, government proposes the following changes in principle to the main areas of retirement administration to enable the new ‘two pot’ system:
Funds
The creation of “retirement pots” and “savings pots” into which the retirement contributions of members are paid is necessary. These ‘pots’ (or accounts) are housed within the current types of retirement funds (a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund).
All prior contributions and growth (i.e. retirement interest) will have to be valued at the date immediately prior to implementation, to enable vesting of rights at that point in time (referred to as the “vested pot”).
The “retirement pot” and “savings pot” will then be accumulated from 1 March 2023 (the first proposed effective date), which means that there is no seeding finance into either of these two pots.
Contributions
This is where the rubber hit the road for payrolls and for employer administration.
As proposed in 2002, a maximum of one-third of the member’s total contribution can go to the “savings pot”, with the remaining amount going to the “retirement pot”, but individual members were allowed to vary the contribution split (subject to meeting the one-third and two-thirds contribution maximums and minimums).
Members of retirement funds will continue to receive a deduction on contributions up to the lesser of 27.5% of gross remuneration or R350,000 per tax year.
Investment growth within the “retirement pot” and the “savings pot” will follow the same tax treatment as other retirement funds (i.e. tax is deferred until it is withdrawn or paid out as annuity benefits).
Withdrawals
Amounts contributed to the “retirement pot” cannot be accessed before retirement. At retirement date, the total value must be paid in the form of an annuity.
Amounts contributed to the “savings pot” can be accessed at any stage but only one withdrawal can be made during any twelve-month period, with a minimum withdrawal amount of R2 000.
Withdrawals from the “savings pot” will be added directly to normal taxable income in the year of withdrawal.
Permissible withdrawals from the “vested pot” will be taxed according to the respective withdrawal tables.
Any funds available in the “savings pot” at retirement or death can either be withdrawn in full or transferred to the “retirement pot”.
Where the member opts to withdraw funds from the “savings pot” as a lumpsum on retirement, the available balance will be taxable as a retirement lumpsum benefit subject to the retirement lumpsum table.
This could result in a tax-free withdrawal of up to R500 000 (R550 000 from 1 March 2023) upon retirement.
Vested rights
The current provisions for contributions to pension funds, provident funds, pension preservation funds, provident preservation funds and retirement annuity funds will continue to apply for contributions and accumulated interest before the first proposed implementation date (1 March 2023) therefore vesting is allowed up to 28 February 2023, together with the associated growth of that total.
As such, individuals who resign from their employment will be able to access the value of their pension fund or provident fund as at 1 March 2023, plus any growth on that amount. Members of preservation funds will still be able to utilise their once-off withdrawal on amounts (and growth) within those funds.
PAGSA comments on the 2022 draft Bill
At a very early stage of the introduction of the ‘two-pot’ system on the 29 August 2022, the PAGSA submitted comments to National Treasury and SARS expressing our concerns from a payroll processing perspective on the administration in payrolls of the draft requirements as proposed.
Problem Statement – Allocation of the Excess of the total Contribution to the ‘Retirement pot’
The member of the fund can decide on the proportion of his or her total monthly contribution that must be allocated to the retirement and to the savings pot, subject to a maximum of one-third of the total contribution going to the “savings pot” and the remaining amount going to the “retirement pot”.
These ratios will vary per employee, and employees can change them at any stage during the tax year.
Queries:
1. In future, must payrolls report the “savings pot” portion of the total contribution separately from the “retirement pot” portion on the tax certificate?
2. How must the contributions be reported if the employee is a member of more than one retirement fund?
3. Will there be separate tax certificate codes for contributions to the ‘savings pot’ and the ‘retirement pot’ for provident, pension, and retirement annuity funds, and for both the employee and employer?
Problem Statement – Allocation of the Excess of the total contribution to the ‘Retirement pot’
Employees can be members of more than one retirement fund (eg. a Provident fund and a Retirement Annuity fund) and both funds are processed in the payroll.
Our understanding is that the total contribution to these funds will be subject to the tax deduction limits of section 11F (the lesser of 27.5% of gross remuneration or R350,000 per tax year) for PAYE calculation purposes, and that any excess contribution above the deduction limit must be allocated to the “retirement pot” and not to the “savings pot”.
In this example, both the Provident fund and the Retirement Annuity fund have a “retirement pot”. It is not possible for the payroll to do an allocation of the excess contribution to the “retirement pots” of the two funds. The question is then:
• What must the payroll do – simply report the total excess contribution on the tax certificate?
• How will the two funds allocate the excess contribution amount between them?
Problem Statement – ‘Savings Withdrawal Benefit’ included in Remuneration definition
The ‘Savings Withdrawal Benefit’ is defined as gross income in a new subsection (eD). Is the intention that it should be included in the Fourth Schedule definition of remuneration?
If included in remuneration, we assume that funds will have to apply for a directive, requiring a change to Fourth Schedule paragraph 9(3) and once in effect, a new tax certificate code.
Problem Statement – Effective date
In our opinion, the complexity of the changes and the potential for ‘unintended consequences’ indicates that it would be advisable to postpone the proposed effective date of 1 March 2023 for at least one year.
PAGSA COMMENTS END
Effective date Postponed from 1 March 2023 to 1 March 2024
It is important to mention that the retirement funds will take the brunt of these changes, and they submitted a steady stream of comments to Treasury and SARS during 2022.
These comments no doubt led to the decision to postpone the Two-pot retirement system until 1 March 2024.
5.3 Two-pot Retirement System – 2023 Draft Amendments
The draft amendments that introduced the ‘Two-pot’ retirement system in 2022 were complex and fraught with potential ‘unintended consequences’.
It was therefore not a surprise that the 2023 Budget Review announced that there would be changes to the 2022 proposals that would be rolled out during 2023, and that the effective date of their introduction has been postponed from 1 March 2023 until 1 March 2024.
2023 Budget Proposal
The postponement was confirmed, and the process of making substantial changes to the 2022 draft amendments began with a proposal on page 50 of Chapter 4 of the 2023 Budget, that stated as follows.
Following extensive public consultation, the first phase of legislative amendments to the retirement system is due to take effect on 1 March 2024.
The intent of these amendments is to enable pre-retirement access to a portion of one’s retirement assets, while preserving the remainder for retirement.
Retirement fund contributions will remain deductible up to R350 000 per year or 27.5 per cent of taxable income per year – whichever is lower.
Permissible withdrawals from funds accrued before 1 March 2024 will be taxed according to the lump sum tables.
Withdrawals from the “savings pot” before retirement will be taxed at marginal rates.
On retirement, any remaining amounts in the savings pot will be taxed according to the retirement lump sum table (for example, R550 000 is a tax-free lump sum on retirement).
Four areas required additional work:
1. A proposal for seed capital,
2. Legislative mechanisms to include defined benefit funds in an equitable manner,
3. Legacy retirement annuity funds
4. Withdrawals from the retirement portion if one is retrenched and has no alternative source of income.
The first three matters will be clarified in forthcoming draft legislation.
The final matter will be reviewed as a second phase of implementation.
2023 NT Media statement
The revised 2023 Draft Revenue Laws Amendment Bill and 2023 Draft Revenue Administration and Pension Laws Amendment Bill were published on 9 June 2023 for public comment.
These draft bills provide the necessary legislative amendments required to:
1. Implement the first phase (pre-retirement preservation) of the “two-pot” retirement system
2. Take into account public comments received on the 2022 Draft Revenue Laws Amendment Bill published on 29 July 2022
3. Change the word “pot” to the word “component” in the bills to be introduced formally by the Minister in Parliament (the word “pot” is still used in the colloquial form to describe the reform itself).
Legislative amendments dealing with withdrawals from the retirement component if a member of the retirement fund is retrenched and has no alternative source of income will be considered in the second phase of the implementation of the “two-pot” retirement system.
Further complementary measures may also be considered in the second phase, to ensure that the primary objectives for saving for retirement is not compromised, and to protect the liquidity of such funds at all stages.
Members of funds should be encouraged to only exercise the withdrawal option as a last resort, and to try and preserve their savings for retirement for when they retire.
2023 Draft Revenue Laws Amendment Bill and Explanatory Memorandum and Proposed Amendments
Proposals
Substantial changes were made to the definitions of each type of the retirement funds, but these are outside the scope of this workbook. The detail of some of the new definitions will only be discussed in this workbook to clarify some of the important proposals that affects employers and payrolls.
The following 3 components within the retirement funds as well as the introduction of the definitions in Section 1 of the Income Tax Act are proposed. Retirement funds will on or after 1 March 2024, be required to create these components for each member, which will be housed within the currently available retirement fund. I
Savings Component
One-third of a member’s total retirement fund contributions from 1 March 2024 will be allocated to the “savings component”. The funds in the “savings component” will be available for withdrawal before retirement without the member having to cease employment.
A member will be allowed to make a single withdrawal (“savings withdrawal benefit”) within a year of assessment.
The minimum withdrawal amount is R2 000 (there is however no limit on the maximum amount a member can withdraw). If a member resigns and has already made use of their single withdrawal, an additional withdrawal will be allowed provided the member’s gross interest in their “savings component” is less than R2 000.
Withdrawal from the “savings component” will be applicable on a per fund or per contract basis.
Withdrawals from the “savings component” will be added to the individual’s taxable income and will be taxed at their marginal rate. If a member dies, their beneficiary can opt to receive the benefit in the “savings component” as either a lumpsum, or they can transfer it to their “retirement component” and receive an annuity.
Retirement Component
Two-thirds of a member’s total retirement fund contributions from 1 March 2024 will be allocated to the “retirement component”. These two-thirds contributions to the “retirement component” will be preserved until retirement (i.e. withdrawals from this component will be triggered by the member reaching normal retirement age per the fund rules – or death).
Amounts contributed to the “retirement component” are only accessible upon retirement.
Once a member has reached retirement age, the “retirement component” is to be paid in the form of an annuity (including living annuities). The current de-minimis as relates to the commutation of annuities (currently R165 000) will apply to annuities from this component. The ability to commute an annuity will be determined with reference to the member’s interests in their “vested component” and “retirement component” and will be determined on a per fund basis.
The current provisions relating to the payments of benefits to beneficiaries of deceased members will apply to payments from the “retirement component” (i.e., the beneficiary will continue to receive an annuity).
Withdrawals from the “retirement component” are accessible as a lump sum when an individual emigrates from South Africa and ceases to be a tax resident. The payment of the said lump sums is however subject to the 3-year rule that under the current regime applies to members of a retirement annuity fund, pension preservation fund or provident preservation fund.
Vested Component
Retirement funds will be required to value a member’s retirement interest on the date immediately prior to the proposed implementation date(1 March 2024), as these amounts will be subject to the current retirement regime (i.e. vested and non-vested rights arising as a result of the annuitisation reform which came into effect from 1 March 2021 will be retained).
Vested rights as relates to the “vested component” and the rules that apply thereto under the current regime will continue to apply after the implementation of the “two-pots” regime.
Members will no longer be able to make contributions to their “vested component” from 1 March 2024. This will however not apply to members of a provident fund who were 55 years or older on 1 March 2021.
These members have the ability to continue making contributions into their “vested component” until they either retire from or leave the fund they were a member of on 1 March 2021. Should they choose to keep contributing to their “vested component” their full contribution will be allocated to the “vested component”. Continued contribution to their “vested component” means they will not be able to contribute to the “savings component” and “retirement component”.
Provident fund members who were 55 years and older on 1 March 2021 are however not precluded from participation in the “two-pots” regime.
Should they wish to participate in the new regime they will no longer be able to continue contributing to their “vested component” (i.e. their contributions will be split between the “savings component” and “retirement component” as is applicable to other retirement fund members).
Amounts contained in the “vested component” will be subject to the current retirement regime.
This includes the ability to make once-of withdrawals from preservation funds, the ability to access pension and provident funds upon resignation, the continued protection of vested rights arising as a result of the annuitisation reform, and the mandatory annuitisation of two-thirds of a members retirement interest with effect from 1 March 2021.
Withdrawals from the “vested component” are accessible as a lump sum when an individual emigrates from South Africa and ceases to be a tax resident.
The payment of the said lump sums is however subject to the 3-year rule that under the current regime applies to members of a retirement annuity fund, pension preservation fund or provident preservation fund.
Other important proposals include the following:
Savings Withdrawal Benefit
The withdrawal from the “savings component” by a member of retirement fund is defined as a “savings withdrawal benefit. A “saving withdrawal benefit” will be available before retirement and without termination of the membership of the fund, subject to the following limitations:
• The member’s right is limited to one withdrawal during a year of assessment;
• Where a member has multiple contracts in the same fund, the member may be allowed one withdrawal during a year of assessment from each of the contracts;
• The minimum value of each withdrawal before taking into account any charges or transaction costs is R2 000.
• A 2nd “savings withdrawal benefit” is allowable when a member resigns from employment within any year of assessment a withdrawal was already made and the total balance the members interest in the savings component is less than R2 000.
The creation of “Seed capital”
It is proposed that ‘seed capital’ is transferred from the “vested component” into the “savings component” as a starting balance in the “savings component” on 1 March 2024. This balance should be available to the member of the retirement fund for withdrawal on implementation date of the “two-pots” retirement system as a “savings withdrawal benefit”.
In order to limit the adverse implication on liquidity, it is proposed that seed capital should be calculated as 10% of the “vested component”, limited to R25 000 (whichever is the lesser).
The provision for seed capital is included in the definition of “savings component” in section 1 of the Act.
Legacy Retirement Annuity Funds
In is proposed that legacy retirement annuity fund be excluded from the provisions of the “two-pot” retirement system, as the inclusion of the legacy retirement annuity fund policies in the “two-pot” retirement system would require a re-design of these historically acquired legacy retirement annuity fund policies.
Effective date: Proposed to be 1 March 2024

2023 – PAGSA comments on the 2023 draft Bill
On 15 July 2023, the PAGSA submitted the following comments on the Draft Revenue Laws Amendment Bill to National Treasury and SARS.
COMMENTS BEGIN
From the perspective of payroll suppliers and employers, we welcome the simplification in the 2023 draft Revenue Laws Amendment Act of the requirements compared to the original requirements that were proposed in the 2022 draft legislation.
Gross Income: Addition of ‘‘(eD) a “savings withdrawal benefit” other than any amount included under paragraph (a), (e) or (eA);”
The savings withdrawal benefit defined in (eD) of gross income has been added to the Fourth Schedule definition of “remuneration” in paragraph (a) as follows:
‘‘(a) any amount referred to in paragraph (a), (c), (cA), (cB), (d), (e), (eA), (eD) or (f) of the definition of ‘gross income’ in section 1 of this Act;’’.
In line with the principles of the exclusions, we suggest that consideration is given to excluding (eD) from the definitions of remuneration in the following three Acts:
1. Compensation for Occupational Injuries and Diseases Amendment Act, 2022
[Issued in Government Gazette 48431 on 17 April 2023]:

The amended definition is included below:
(g) by the substitution for the definition of ‘‘earnings’’ of the following definition: ‘‘‘earnings’ means the remuneration … as defined in paragraph 1 of the Fourth Schedule to the Income Tax Act, 1962 (Act No. 58 of 1962), but does not include any amount paid or payable to an employee—
(a) by way of any pension, superannuation, allowance or retiring allowance; and
(b) which constitutes an amount contemplated in paragraphs (a), (cA), (d), (e) or (eA) of the definition of ‘gross income’ in section 1 of the Income Tax Act, 1962;’’;

Note: An effective date has not yet been Gazetted for the CF Amendment Act but it is expected “shortly”.

2. Skills Development Levies Act section 3(4)(c):
(c) contemplated in paragraph (a), (d), (e) or (eA) of the definition of “gross income” in section 1 of the Income Tax Act;
3. Unemployment Insurance Contributions Act definition of remuneration:
“which constitutes an amount contemplated in paragraphs (a), (cA), (d), (e) or (eA) of the definition of “gross income” in section 1 of the Income Tax Act; or”;

Payrolls to ‘split’ the one-third/two-third of the total contribution to a Retirement Fund?
If payroll systems are expected to administer ‘split’ contributions to retirement funds it will give rise to problems.
However, our understanding is that payrolls will continue to process the total contribution to a retirement fund and tax these contributions as is currently done, and that payrolls are not expected to ‘split’ the total contribution into one-third/two-third components.
If this is the case, we do not anticipate any problems.
I trust that these comments will be of help to you.
PAGSA COMMENTS END
2023 Summary of the Two-pot Rules
The following summarises the points of the 2023 Explanatory Memorandum that accompanies the draft Amendments.
Contributions
1. All prior contributions and growth (hereinafter ‘the vested pot’), will be valued up to 28 February 2024 and continue to operate under the existing rules as at that date. Permissible withdrawals from the ‘vested pot’ will therefore be taxed according to the lump sum withdrawal tables.
2. No further contributions can be made to the ‘vested pot’ from pension funds, provident funds, or retirement annuity funds, except for members of provident funds who were 55 years or older on 1 March 2021, as they are able to contribute to those funds until they either leave the fund or retire.
3. As from 1 March 2024, contributions will be split by the retirement fund into two pots, two-thirds into the ‘retirement pot’, and one-third into the ‘savings pot’. These are fixed percentages – thankfully the employee has no choice in the matter (as was proposed in 2022 which would have been a nightmare).
4. The two pots will be housed in the current types of available retirement funds, be it a pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund.
Withdrawals
5. Amounts contributed to the ‘retirement pot’ cannot be accessed before retirement. At retirement date, the total value must be paid in the form of an annuity (including a living annuity). The current minimum amount for purchasing an annuity (de minimus of R165 000) will apply to the ‘retirement pot’. It appears that the one-third lump sum / two-third annuity pay-out rules might have been replaced by one-third of the total contribution being allocated to the savings pot, which can be paid out as a cash lump sum, but there is also reference to the ability to “commute” an annuity, so the position is not clear.
6. Amounts contributed to the ‘savings pot’ can be accessed without any conditions, but only one withdrawal can be made during a year of assessment (not every 12 months as was the case with the 2022 proposals). The minimum withdrawal amount is proposed to be R2 000. These withdrawals will be subject to the fund rules allowing them.
7. Any funds available in the ‘savings pot’ at retirement or death can either be withdrawn in full or transferred to the ‘retirement pot’.
8. Where the member opts to withdraw funds from the ‘savings pot’ as a lumpsum on retirement, the available balance will be included in gross income and taxed at the member’s marginal tax rate. This seems unfair – the one-third lump sum is currently taxed using the more beneficial withdrawal tables.
9. Full withdrawals from the retirement, savings and vested pots can take place if an individual ceases to be tax resident for at least 3 years, with the appropriate tax treatment based on the facts and circumstances of the case. In these instances, the ‘vested pot’ will be taxed in accordance with the pre-1 March 2024 tax provisions, the ‘savings pot’ will be included in gross income and taxed at the member’s marginal tax rate, and the ‘retirement pot’ will be taxed using the lumpsum withdrawal tables.
Tax Rules
10. Members of retirement funds will continue to receive a deduction on contributions up to the lesser of 27.5% of gross remuneration or R350 000 per tax year.
11. Investment growth within the ‘retirement pot’ and the ‘savings pot’ will follow the same treatment as other retirement funds (i.e. tax is deferred until it is withdrawn or paid out as annuity benefits).
12. Withdrawals from the ‘savings pot’ (including the ‘seed capital’) will be included in gross income and taxed at the member’s marginal tax rate in the year of withdrawal.
13. Individuals who resign from their employment will be able to access the value of their ‘vested pot’ as established on 28 February 2024, plus any growth on that amount. Members of preservation funds will still be able to utilise their once-off withdrawal on amounts (and growth) within those funds.
14. Intra-fund transfers are allowed at any time the member wishes (tax directive required):
• From his “savings component” to his “retirement component”; and
• From his “vested component” to his “retirement component”.
15. Inter-fund transfers are only permissible when a member resigns or retires from their respective fund and only if all components are transferred to the transferee fund. The below inter-fund transfers will be permissible as tax-free transfers (tax directive required):
• “Saving component” to the transferee fund’s “saving component”
• “Saving component” to the transferee fund’s “retirement component”
• “Vested component” to the transferee fund’s “vested component”
• “Vested component” to the transferee fund’s “retirement component”
• “Retirement component” to the transferee fund’s “retirement component”.
16. Both inter-fund and intra-fund transfers will be subject to the fund obtaining a tax directive.
CAUTION:
The National Treasury workshop to discuss the 2023 public comments will be held on 6 September 2023 (a few days after this workbook was finalised).
The final position will be clarified in revised Bills that will presumably be issued later this year in which case we might still have promulgation early in 2024 and an effective date of 1 March 2024.
2023 Summary of Responsibilities for Two-pot Administration
At this early stage, it appears that the draft Two-pot amendments will result in the following responsibilities.
Two-pot Responsibilities – PAGSA Members (Payroll suppliers)
1. It appears that there are no changes to payroll systems.
2. This is a ‘first’!
Two-pot Responsibilities – Employer
1. Inform employees of their rights and responsibilities regarding the Two-pot retirement system
Two-pot Responsibilities – Employees
1. If an emergency expense arises, request the retirement fund to withdraw and pay a portion of the savings pot balance.
Two-pot Responsibilities – Retirement Fund Responsibilities
1. Create accounts for all members for their vesting, savings and retirement ‘pots’
2. Calculate and allocate the seeding capital into the member’s vested pots
3. Apply the one-third/two-third split of contributions between savings and retirement pots for all members
4. Invest the amounts in the three pots for growth
5. Administer requests for a pay-out from a savings pot
6. Apply for a directive from SARS to tax the pay-out
7. Pay the member.
5.4 Two-pot Retirement System – Next Steps
The following are the next steps that are required to complete the annual legislation amendment cycle.
1. Workshop 6 September 2023:
The PAGSA has been invited to attend the National Treasury and SARS workshop during which the comments on the 2023 Draft Revenue Laws Amendment Bill will be discussed.
As a matter of interest, the agenda for the workshop consists of nearly four pages of bullet points.
2. National Treasury and SARS take away from the workshop the comments that they feel are valid and apply them to the Draft Revenue Laws Amendment Bill to create a Revenue Laws Amendment Bill.

3. The Standing Committee on Finance (a Parliamentary working group) then discuss and check the Revenue Laws Amendment Bill and issue a Final Revenue Laws Amendment Bill.
Usually in October.

4. The Final Revenue Laws Amendment Bill is tabled in the National Assembly and the National Council of Provinces for approval.
Usually in November.
5. The approved Final Revenue Laws Amendment Bill lands on the State President’s desk. Once he signs the final Bill, it is promulgated and will be known as the Revenue Laws Amendment Act. It is then final law and will be put into operation from the effective date stated in the Amendment Act.
Usually in January.
5.5 Two-pot Retirement System – Closing Comments
This well-intentioned legislation will no doubt have a positive result on retirement savings in future years.
At the stage where we are now (September 2023) and thinking of the very long list of points on the agenda for discussion in the workshop of 6 September 2023, in my opinion we might see another postponement from 1 March 2024 to 1 March 2025.
This will bring relief for the system and the infrastructure changes that retirement funds will have to put in place, but on the other hand it might overlap with the roll-out of the Vision 2024 PAYE project.