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Over the past few days, the South African government has made headway with two hot topics around the long-awaited legislation for the “two-pot” retirement system and the National Health Insurance (NHI) bill.
Source: Supplied. Yolandi Esterhuizen, director: product compliance, Sage Africa and Middle East and registered tax practitioner.
As important as these milestones may be, it might be a while before they begin impacting employers and employees. Let’s take a closer look at what these developments will mean.
The latest news includes the publication of the 2023 Draft Revenue Laws Amendment bill, and the passing of the 2023 Draft Revenue Administration and Pension Laws Amendment bill for comment by the National Treasury (NT) and the South African Revenue Service (Sars).
These drafts relate to the introduction of a “two-pot” retirement system. Separately, the National Assembly has passed the NHI bill. The two-pot retirement system refers to a significant reform in retirement laws that aims to get the right balance between encouraging people to preserve retirement savings and allowing them to access retirement funds in a financial crisis.
The reform was partly inspired by the financial and economic hardships many South Africans endured during the Covid-19 crisis. Under the proposed bill, the new retirement regime proposes the creation of the following components within retirement funds:
- A savings component: Retirement funds will be required to create a savings component. You will contribute one-third of your total retirement contributions to this component. You can withdraw this money before you retire without needing to resign from your job. You can only make one withdrawal per year from the savings component. These funds will be taxed at your marginal tax rate.
- A retirement component: Retirement funds will be required to create a retirement component. You will be required to contribute two-thirds of your total retirement contributions to this component. These funds can only be accessed when you reach retirement age. Withdrawals are also allowed when an individual emigrates and ceases to be a tax resident, subject to a three-year waiting period.
- A vested component: This component houses the retirement funds you built up before the two-pot system became effective. Amounts contained in the “vested component” will be subject to the current retirement regime—in other words, the regulations that are currently in place.
- Seed capital: This is the portion of your existing retirement funds you can transfer to fund the accessible savings component when the two-pot system is introduced. You may contribute up to 10% of your current savings, capped at R25,000, to seed the accessible pot.
Source: bizcommunity.com
