Under the current system, employees have early access to their retirement savings only when they leave their job through resignation or retrenchment. Under the Two-Pot Retirement System, they’ll have access to a portion of their savings before retirement, without needing to resign.

The new rules only apply to future savings, though, so – despite the rumours and misconceptions – retirement-fund members won’t suddenly have full access to all the money in their retirement fund. However, a seeding amount of 10% of the member’s existing retirement savings as of the effective date (up to a maximum of R30 000) will be moved into the Savings Component (or the accessible “pot”).

“Just because you may access a portion of your retirement savings, doesn’t mean you should,” warns Michelle Acton, Retirement Reform Executive at Old Mutual. “Fund members should remember that retirement savings are designed to be your lump sum at retirement, so any access prior to this should be properly considered.”

The drive to digital

But while the new system is specifically designed to encourage the preservation of retirement savings, the economic reality is that many employees are struggling financially – hence the expected increase in claims volumes.

Old Mutual expects more than half of the nearly 500 000 members of its SuperFund to come forward on the implementation date and claim money from their Savings Pot. “The only way for retirement fund administrators to cope with the expected claims volumes is to go digital,” says Acton. “That includes digitising the fund’s existing processes.”

“Administratively, if you’re an employer and you’ve got 1 000 members or employees, that means 1 000 employees [may] want to have their money on the first day,” Acton said in a recent episode of Old Mutual Corporate’s Big Business Insights podcast series.

“Members are going to have to approach the administrators separately – not through the employer – to process those claims. Otherwise, an employer is going to need to hire a whole new admin team just to cope with pension-fund claims!”

For both employers and funds, preparation is going to be key. As the clock counts down to 1 September, there are four specific, practical actions that employers can take in the months leading up to the Two-Pot Retirement System’s implementation date.

1. Update your employee data

We’re moving into a world in which employees (or, from the fund’s point of view, fund members) will initiate withdrawal claims digitally. In this world of digital fund administration, it’s more important than ever that retirement funds have accurate member data.

“Before, employers always owned that data or member information, and whatever information was given to the administrators was what the administrator or the retirement fund had,” said Acton.

“What’s important – especially if you’ve got a lot of different funds – is to make sure the quality of information and data you’re giving those retirement funds is accurate.”

The key data funds will need about each member are the following:

1. First names (as per Home Affairs)
2. Surname (also as per Home Affairs)
3. ID/passport number
4. Cell number
5. Tax number (as per SARS)

Individuals can find more information from SARS here, while (downloadable) information for employers is available here.

2. Know the rules

While it’s the fund administrator’s responsibility to run your retirement fund, it’s only natural that employees will have questions about the new regulations. Due to the sheer volume of claims, employees will in all likelihood have to initiate the claims process directly with their retirement fund. But when it comes to questions like “How much can I withdraw?” and “What happens to my existing savings?”, they’ll still come knocking on HR’s door. 

“There’s no doubt that if members have questions on their retirement fund, they’re going to go to the employer for the quick answers,” said Acton. “So it’s going to be important that your HR and payroll staff are well-versed with how the new system will work.”

3. Engage with your fund administrator 

To navigate the new system, employers will have to work very closely with their intermediaries and retirement-fund administrators to know exactly what they can expect and how the new processes will work. 

Don’t leave that too late, Acton warns. “In the months leading up to the Two-Pot Retirement System’s implementation date, ensure your fund administrator is on the path to being ready.”

4. Keep employees informed

“There’s a lot of misinformation out there,” said Acton. As we all count down to 1 September, rumours will continue to do the rounds and misinformation will continue to spread. Employers have a duty of care to help their employees navigate the change by keeping them informed. 

“Be part of the conduit to push the communication down to the members on the ground, and to make sure people don’t panic,” Acton said. “There’s no need for employees to start trying to resign before the effective date because they think their money is going to be lost or locked in. None of that’s happening.”

Ready for the change

Acton has, as she puts it, been “knee-deep in Two-Pot for the past year or so”. “It’s a massive change,” she said. “It’s probably the biggest change ever to hit our retirement-fund industry.” But the retirement industry has been gearing up for the new system for a few years now, and South Africa’s leading retirement funds like Old Mutual’s SuperFund are well prepared. Employees will expect their employers to be ready to roll on 1 September, too – and SuperFund’s participating employers can expect Old Mutual to be there to support them throughout the process. 

For more insights on the Two-Pot Retirement System and what it will mean for you, your employees and your business, visit our Two-Pot page.