National Treasury responds to the public submissions on the Pension Funds Amendment Bill

With the “Two-Pot System” being the topic of conversation of all stakeholders of the pension fund industry, it is apt that National Treasury addressed the Finance Standing Committee, housed by the National Assembly, on 19 March 2024 with its responses to the public submissions received on the Pension Funds Amendment Bill. One of the main concerns raised by the public in relation to the Bill was the contradictions between the Pension Funds Act and the Divorce Act. In addition, there was concern on whether the “Two-Pot System” changes would also apply to public sector retirement funds as they are not governed by the Pension Funds Act.

National Treasury’s feedback to the Finance Standing Committee can be summarised as follows –

1. A new section 1A in the Pension Funds Act will state that if there is a conflict between the Divorce Act and the Pension Funds Act, the latter will prevail. This will cure the conflict that arises with respect to the pension interest definition.
2. For individual public sector retirement funds, each Act should include a similar clause overriding the Divorce Act with respect to the pension interest definition.
3. Amendments are to be introduced in the Post and Telecommunications Related Matters Act, 1958, the Transnet Pension Fund Act, 1990 and the Government Employees Pension Law, 1996 to insert definitions that provide for:
   1. the introduction of the savings withdrawal benefit;
   2. the appropriate account of a member’s interest in the savings, retirement and vested components;
   3. the deductions that may be made in those components; and
   4. connected matters.
4. Changes to the rules and statutes of public sector retirement funds which do not fall within the ambit of the Pension Funds Act should not delay the implementation of the two-pot system.
5. With respect to the concern regarding the exclusion of the retirement component from loan and guarantee-related deductions in terms of section 37D of the Pension Funds Act, the Revenue Laws Amendment Bill already states that the 37D related deductions will be proportionally deducted from all components.
6. Access to the savings component by the member will be restricted if such access will result in insufficient amounts remaining to settle any pending court order. In other words, if the member seeks to make a withdrawal and there is pending litigation against them for a claimed sum of money, the member will be restricted from making a savings withdrawal.

After noting Treasury’s responses to the public submissions, the Bill was adopted by the Finance Standing Committee on 22 Mach 2024. The Bill together with the report on the Bill was tabled and passed by the National Assembly on 27 March 2024. The Bill is now before the National Council of Provinces (NCOP) for concurrence. If the NCOP passes the Bill, as passed by the National Assembly, it will then be transmitted to the President for signature.

Further developments regarding the Bill and its implementation will follow.