National Treasury and the South African Revenue Service have released the revised 2023 Draft Revenue Laws Amendment Bill and 2023 Draft Revenue Administration and Pension Laws Amendment Bill for public review and feedback. These draft bills include the necessary legal changes to implement the initial phase of the “two-pot” retirement system, which will allow for early access to retirement savings and compulsory preservation. The revised bill also takes into account the public comments received on the 2022 Draft Revenue Laws Amendment Bill that was published on the 29th of July 2022.

The Fund has communicated extensively on the developments surrounding the “two-pot” system, details of which were also included in the 2021/2022 Intergrated Report, available here NFMW Integrated Report (nationalfund.co.za)

The revised 2023 Draft Revenue Laws Amendment Bill includes the following important tax proposals mentioned in Chapter 4 of the 2023 Budget Review:

1. Name change: In the new legislation the word “pot” will change to “component”.

2. Date of implementation: The proposed implementation date of the “two-pot” retirement system remains unchanged as at 1 March 2024.

3. Seed capital: A maximum of R25 000 to be made available on implementation date through seed capital and withdrawals will be taxed in the hands of the member. The proposed seed capital will allow retirement fund members to access a portion of their accumulated savings in the Fund on the implementation date (1 March 2024). To limit the negative effect on a Fund’s liquidity, it is proposed that members will be able to withdraw up to 10% of their accumulated savings as at 29 February 2024, limited to a maximum of R25 000, whichever is lower. AS AN EXAMPLE:

The member will be taxed on withdrawals. It is important to note that when a member withdraws the seed capital, it will be included in his/her taxable income and subject to the regular marginal tax rates.

The revised 2023 Draft Revenue Laws Amendment Bill further proposes that:

• Different rules will apply to ensure fair treatment of Defined Benefit funds.
  Please note that NFMW is a Defined Contribution Fund, and therefore these changes will not be applicable to NFMW members.
• Legacy retirement annuity funds be excluded from the two-pot retirement system.

The above deals with the first phase of the legal implementation of the “two-pot” system. The second phase will deal with members who are retrenched and do not have any other means of income. National Treasury indicated that further complementary measures may also be considered in the second phase, to ensure that the primary objectives for saving for retirement is not compromised, and to protect the liquidity of such funds at all stages.

National Treasury reiterated that members of funds should be encouraged to only exercise the withdrawal option as a last resort, and to try and preserve their savings for retirement for when they retire. It remains the Fund’s responsibility to ensure that members understand these changes and the implications thereof and we will therefore keep you updated on any new developments.

The due date for public comments
National Treasury invited comments in writing on the revised 2023 Draft Revenue Laws Amendment Bill, the Draft Explanatory Memorandum on the Draft Revenue Laws Amendment Bill, 2023 Draft Revenue Administration and Pension Laws Amendment Bill and the Draft Memorandum on the objects of the Draft Revenue Administration and Pension Laws Amendment Bill. Written comments are to be submitted to the National Treasury’s depository at 2023AnnexCProp@treasury.gov.za and SARS at acollins@sars.gov.za by close of business on 15 July 2023.