In October 2023 Old Mutual Corporate hosted a webinar to discuss the latest updates to National Treasury's proposed Two-Pot Retirement System, how it will affect intermediaries and how it will change the way brokers engage with their clients in the retirement industry.

Here are some of the key take-aways.

When will the Two-Pot Retirement System come into effect?

Initially, in 2022, the government had communicated the implementation date as 1 March 2024. After numerous discussions and changes, the implementation date is currently 1 September 2024.

What are some of the recent big changes to the proposed legislation that we need to be aware of?

The seeding cap, which determines how much a retirement fund may transfer to a member's Savings Pot for immediate access when the system takes effect, has been increased. That amount was R25 000, but it has now been upped to R30 000.

How will the Two-Pot Retirement System affect intermediaries?

Intermediaries will have to get a lot more involved in understanding how they’re going to support their clients and the clients’ employees around retirement investment decision-making. There’s also going to be a lot of change management required, and intermediaries have an important part to play here.

What are the extra costs and fees as a percentage of retirement savings?

The simple answer is that we don’t know yet. We do know that most working South Africans will have more than just two pots under the Two-Pot Retirement System. This is because the existing rules will still apply to fund members’ existing savings, with the new rules only applying to future savings (after the implementation date).

That makes things very complicated from an administrative point of view... and retirement fund administrators will have to invest heavily in getting their staff, systems and call centres ready to manage those multiple pots. Intermediaries will also have to spend more billable hours helping their clients.

Are we doing away with the one withdrawal option that exists within a preservation fund?

Yes. The one withdrawal will still apply to the Vested pot. Any Savings pot money in a preservation fund can be accessed based on the new Savings Pot access rules.

What if you have more than one preservation fund and they have different administrators?

If you have a preservation fund and an RA and you’re a member of, for example, the Old Mutual Superfund, you can access all three as you need to. Fund members who have money invested in different savings vehicles during their lifetime will have more flexibility.

More complexity and costs. How does this benefit members and why not promote voluntary emergency savings outside of the system?

We believe that the compulsory preservation of the Retirement Pot will improve member retirement values in the long term.

What is the most important thing that non-industry people need to know?

The most important thing is nothing is going to change with your existing savings. Old rules apply to your existing “pot”. The new rules will apply to all future contributions from 1 September 2024, and the Savings pots will be taxed at marginal rates.

If you want more insights and views on the Two-Pot Retirement System, watch our webinar.