Overall shape of the proposed Two Pots regime remains largely unchanged

This note is an update on two important pieces of legislation that are currently before Parliament – when enacted and signed into law, these will give effect to the so-called “Two Pots” pensions reforms. At the time of writing this note, the likely implementation date for the Two Pots regime is 01 September 2024, i.e. in a little more than six months’ time.

We refer to “Two Pots” in this note, although, as highlighted in our previous client notes on this subject, there are in fact three “pots”, or “components” as the draft legislation calls them, to consider. These are the retirement component, the savings component, and the vested component. (We will use the terms “pot” and “component” interchangeably.)

Please refer to the client notes that we issued in June and October 2023 for more details on the Two Pots proposals.

Legislative timetable

The Revenue Laws Amendment Bill (“RLAB”), which makes the key changes to the Income Tax Act that lay the foundation for the Two Pots regime, was introduced in Parliament by the Minister of Finance on 1 November 2023 and is progressing through the standard Parliamentary processes, including Committee hearings. At the time of writing, it seems that the Bill will be debated (and presumably voted on) by the National Assembly on 20 February. The Bill also has to be considered and approved by Parliament’s other chamber (the National Council of Provinces) before it can go to the President to be signed into law. Depending on exactly when Parliament rises ahead of the upcoming national election, it should be possible to complete these processes during the current Parliamentary term.

The Pension Funds Amendment Bill, which (among other things) makes some consequential changes to the Pension Funds Act (“PFA”), was only introduced into Parliament at the end of January. National Treasury briefed the National Assembly’s finance committee on this Bill on 6 February, but it appears that the further Parliamentary processes are only timed to begin in March. The Chairperson of the finance committee has already warned that there may not be enough time to finish processing this Bill before Parliament rises.

One issue raised by Treasury in the presentation to the finance committee is that it will be necessary to amend the Government Employees Pension Law, the legislation governing the Government Employees Pension Fund (“GEPF”), to give effect to the Two Pots regime for GEPF members, which has always been Government’s intention. This may possibly be achieved by extending the scope of the Pension Funds Amendment Bill, but this would apparently require public hearings on the amended Bill, which will clearly delay the process.

To learn more, download latest developments on “Two Pots” retirement reforms.