As we reflect back on 2024, it’s difficult to comprehend where the time has gone. It reminds me of an elderly gentleman I once encountered at a Retirement Workshop who aptly said, “Life is like an hourglass—the sand seems to flow faster as it runs out.”

Looking back on the year, we can identify several significant events for South Africa.

7th National Election

The first is that South Africa celebrated another successful democratic, free and fair, election. The ANC lost its majority vote, with the newly formed MK Party making a powerful statement, with the support of nearly 50% of the KwaZulu-Natal voters and 15% nationally.

Tense weeks followed, as the political parties robustly negotiated the way forward for the country. Investor sentiment was negative, and money continued to flow from the bond markets. Following the negotiations, the political parties agreed to form a Government of National Unity (GNU), with ministerial representation for all the parties forming the GNU. Global investors have responded positively, with money once again flowing back into the country and the All-Share Index reaching record highs. There will no doubt be significant challenges going forward but we once again remain confident that the coalition government will act in the best interests of all South Africans.

National Health Insurance

The second significant event was that the National Health Insurance (NHI) bill was signed into law on 15 May 2024. The objective of the NHI is to introduce quality healthcare access for all South Africans and eradicate the current inequalities that exist in the country. The signing of the bill into law was not well received by many stakeholders, despite the concerns raised during extensive public engagements, the President still signed the bill into law without significant change. Initially, there is no impact as medical benefits remain in their current form. Industry commentary following the passing of the NHI bill into law is that the actual introduction of NHI is still at least ten years away. It is anticipated the Act in its current form will be legally challenged by many stakeholders as they believe there has been insufficient focus on critical areas, such as funding, human resource reallocation, current public sector healthcare corruption and the rollout process for the implementation of NHI. The status quo remains until further dialogue and communication is forthcoming from the healthcare industry.

Two-Pot (Component) System

The third significant event was the signing into law of the two-pot legislation, (I will refer to the pot, although the legislation refers to component) after several postponements. The effective date is 1 September 2024. Although there has been extensive previous communication from Chartered Employee Benefits, Fund administrators and the media, there still appears to be some confusion about who is affected by the two-pot system, so I will attempt to clarify some of these misconceptions below:

• The new system applies to the build-up phase of retirement, namely those members contributing to their retirement funds. It does not apply to pensioners; however, if a pensioner is contributing to a Retirement Annuity, it will apply.
• Members who are “55 years or older” on 1 March 2021 and have remained a member of the same Provident Fund will automatically be excluded from the two-pot system. These members can choose to opt into the two-pot system. They have until 1 September 2025 to decide if they wish to opt in, and thereafter, they can no longer opt-in.
• The two-pot system applies to both defined benefit and defined contribution funds. It also applies to pension, provident, preservation, and retirement annuity (RA) funds. It does not apply to beneficiary funds and unclaimed benefit funds.
• “Legacy” or “old generation” RA funds can be exempted. The legacy RAs are contracts held by an RA fund entered before 1 September 2024 that include a pre-universal life or universal life component. These funds can apply to the FSCA for an exemption from the two-pot system.
• Deferred pensioners will only have two pots in a fund (these are people who resigned and opted to leave their money in the fund until retirement). These members will have a vested pot and a savings pot. They will not have a retirement pot, because they are no longer making contributions. Their savings pot will consist entirely of the seed capital.
• Members are permitted one withdrawal per tax year, not per calendar year.
• A member not withdrawing from the savings pot, will not forfeit access to the amount they could have drawn in subsequent years.
• A member belonging to more than one fund, e.g., an RA and an occupational fund, can withdraw from each savings pot as long as the minimum value exceeds R2000.
• Withdrawals from the savings pot, while in service, are taxed at the member’s marginal rate of tax.
• Funds were required to submit rule amendments to the FSCA by 15 July 2024. If the rule amendments have not been approved by 1 September 2024, members will be unable to withdraw from the savings pot.

As we move forward into the second half of 2024, the retirement fund industry is buzzing. Fund administrators and service providers are hard at work making changes to systems and processes.

Consultants are engaging with members to educate them on the two-pot system to help members understand the implications and impact of withdrawing money from their savings pot prior to retirement.

We watch with interest the progress of the Government of National Unity and the challenges anticipated with the rollout of the NHI.