ATC240322: Report of the Standing Committee on Finance on the Pension Funds Amendment Bill [B3 - 2024] (National Assembly- section 75), dated 22 March 2024

Finance Standing Committee

Report of the Standing Committee on Finance on the Pension Funds Amendment Bill [B3 - 2024] (National Assembly- section 75), dated 22 March 2024


The Standing Committee on Finance, having considered the 2024 Pension Funds Amendment Bill [B3 - 2024] (National Assembly- section 75) referred to it and classified as an ordinary Bill, reports the Bill with amendments [B3B -2024] as follows:

    1. The Pension Funds Amendment Bill, 2024 (PFA Bill) aims to amend the Pension Funds Act (PFA) to incorporate retirement reforms.
    2. The draft Bill underwent a process of public consultation, beginning with its publication for comments on 9 June 2023. This consultation involved stakeholders making oral presentations, and revisions were made based on public feedback.
    3. Following revisions, the Bill was withdrawn for Cabinet approval and certification by the Office of the Chief State Law Adviser. It was subsequently introduced in the National Assembly on 30 January 2024. Notably, the Bill has not been referred to NEDLAC (National Economic Development and Labour Council), although key stakeholders such as labour federations and some unions were consulted throughout the process.
    4. The proposed "two-pot" retirement system addresses two primary concerns within the current retirement system. Firstly, it aims to tackle the lack of preservation before retirement, which often results in individuals accessing their funds upon changing jobs.
    5. Secondly, it addresses the issue of limited access to funds in cases of financial distress. Under this system, retirement savings will be preserved when members change jobs, and limited access to these savings will be permitted before retirement without the need for resignation.
    6. The implementation of the "two-pot" retirement system involves several key components. Seed capital will be provided, allowing immediate access to a portion of the retirement fund balance upon implementation. This seed capital is calculated as the lesser of ten per cent of the vested component or R30 000.
    7. Additionally, retirement funds will be required to create a savings component, to which members will contribute one-third of their total individual retirement fund contributions. Assets in this component will be available for withdrawal before retirement, subject to certain conditions.
    8. Furthermore, retirement funds will establish a retirement component, to which members will contribute two-thirds of their total individual retirement fund contributions. Assets in this component will be preserved until retirement, with withdrawals only allowed upon retirement per fund rules.
    9. A vested component will also be created, containing amounts subject to the current retirement regime. Contributions to the vested component will cease upon the implementation of the new regime, except for provident fund members aged 55 or older on 1 March 2021, who can continue contributions until retirement or leaving the fund. Additionally, provident fund members aged 55 or older on 1 March 2021 can choose to participate in the new regime but will no longer contribute to the vested component if they do so.


    1. Public participation in the legislative process of the PFA Bill was integral to ensuring transparency and inclusivity. The Committee was initially briefed by NT on the draft PFA Bill on 29 August 2023, followed by public hearings held from 06 to 08 September 2023. During these hearings, various stakeholders had the opportunity to provide both written and oral submissions.
    2. On 25 October, NT presented comprehensive draft responses to the submissions made by stakeholders, addressing all comments received during the public hearings, Committee briefings, and deliberations. Organizations such as Old Mutual, the South African Institute of Chartered Accountants (SAICA), the South African Institute of Tax Practitioners (SAIT), PricewaterhouseCoopers (PwC), Congress of South African Trade Unions (COSATU), ASISA, IRFA, and GEPF were among those who participated in this process.
    3. Overall, NT reported receiving 287 submissions specifically related to the "Two-Pot" Retirement System, indicating significant public interest and engagement with the proposed reforms. After Cabinet approval on 30 January 2024, the Committee reinitiated the public consultation process to ensure all voices were heard.
    4. Subsequently, on 6 February, the Committee received a briefing from NT. In the briefing NT explained to the Committee that amendments to introduce the two-pot retirement system may also be required for the Government Employees Pension Fund and other non-PFA administered funds. This expansion of scope could entail amendments to laws governing funds under the Post & Telecommunications Related Matters Act and Transnet Pension Fund Act, subject to Committee approval.
    5. Public hearings were then held on 12 March 2024, during which four organizations—COSATU, ASISA, IRFA, and Bowmans—requested to make oral submissions. Additionally, written submissions were provided by Cardiant, ENS, and GEPF.
    6. Following these hearings, NT responded to all submissions in writing and orally on 19 March, allowing stakeholders the opportunity to engage with the responses provided. This iterative process of consultation and feedback underscores the Committee's commitment to transparency and stakeholder engagement in shaping important legislative reforms.


    1. The PFA Bill in South Africa encompasses revisions to the retirement fund system, with a particular focus on the implementation of a "Two-Pot" retirement system.
    2. The main objective of the Bill is to facilitate the implementation of the policy objectives related to the two-pot system outlined in the Revenue Laws Amendment Bill, 2023 (RLAB). The RLAB primarily focuses on amendments to the Income Tax Act, 1962 (ITA), which are aimed at introducing the two-pot system.
    3. In order to effectively align with the amendments proposed in the RLAB and enable retirement funds to properly implement these changes, the PFA Bill proposes certain amendments to the Pension Funds Act and related pension funds. These amendments are deemed necessary to ensure that retirement funds can adequately adjust their operations and procedures in accordance with the alterations set forth in the ITA by the RLAB.
    4. Therefore, the PFA Bill serves as a complementary legislative instrument to the RLAB, providing the necessary framework within the PFA and related pension funds laws to support the implementation and execution of the two-pot system as outlined in the ITA amendments.

Key Clauses in the Bill

  1. Clause 1 of the PFA Bill proposes the insertion of new definitions to aid in the interpretation of the Bill. One significant addition is the definition of "pension interest," which encompasses various elements such as recognizing marriages according to religious tenets, applying the clean break principle on the date of the court order, and allocating divorce order settlements from all three components.
  2. Clause 2 addresses amendments to section 14B of the Pension Funds Act (PFA), aiming to amend the definition of “OC” and insert a new subsection to align with the provisions and requirements of the Revenue Laws Amendment Bill (RLAB). The term "OC" pertains to any other amounts lawfully permitted, credited to, or debited from the member’s individual account.
  3. Clause 3 focuses on amending section 19(5) of the PFA concerning loans and guarantees to retirement fund members by retirement funds and employers. The amendments seek to align this section with the provisions and requirements of the RLAB. Notably, it proposes a cap on the amount of a loan or guarantee to a maximum of 65% of the member’s benefit available, including their interest in various components.
  4. Clause 4 proposes the substitution of section 37D of the PFA to enable retirement funds to make deductions from retirement fund benefits in line with the provisions and requirements of the RLAB. These deductions include amounts due to the member's employer, payments under maintenance orders, portions of pension interest assigned to non-member spouses, and other allowable deductions. Additionally, it specifies conditions under which a member may or may not take a savings withdrawal benefit and outlines restrictions for funds aware of orders against members.
  5. Other key clauses amend the other related pension funds laws of the GEPF, Transnet, and Posts and Telecommunications in a similar manner with the PFA.




    1. The stakeholders raised several concerns and made requests regarding the Bill. One concern was the inclusion of clauses unrelated to the two-pot system, such as payment of divorce awards, which deviated significantly from current provisions. In response, NT proposed retaining the current wording in the Act, reverting to existing provisions. Additionally, stakeholders sought clarification on potential contradictions with the Divorce Act. NT agreed to insert an application clause in the Bill, ensuring that in case of conflict, the Pension Funds Act would prevail.
    2. Another issue raised was the exclusion of the retirement component from section 37D deductions, potentially leading to inequitable treatment. NT acknowledged this concern and pledged to ensure deductions applied proportionally across all components. Stakeholders also advocated for special protection of the savings component, expressing concerns about pending deductions impacting access to funds. The Treasury clarified that protections were in place, permitting access to savings unless it depletes the component.
    3. Stakeholders highlighted the importance of timing, expressing worries that changes to public sector funds might delay the two-pot system implementation. NT assured stakeholders and the Committee of its commitment to avoiding delays but noted the parliamentary nature of the legislative process. Additionally, stakeholders sought clarity on terminology and proposed changes to certain definitions within the Bill. NT accepted some proposals, such as amending references to "valuator" and "vested component," aligning with drafting conventions.
    4. There were requests for clarity on the applicability of the new definition of ‘pension interest’ and proposed changes to certain sections, including section 37D. NT responded by stating that the effective date would be determined by presidential proclamation, with the two-pot system set to be implemented on 1 September 2024.
    5. Additionally, stakeholders raised concerns about future regulations, requesting draft releases to aid understanding. NT agreed to delete references to future regulations and release them when necessary.
    6. Various drafting errors were pointed out by stakeholders, including grammatical mistakes and incorrect references. NT accepted these comments and made the necessary amendments. Moreover, stakeholders suggested extensions to withholding periods and modifications to certain provisions related to home loans and guarantees. While NT acknowledged these suggestions, it emphasized the need to balance member access and financial obligations.
    7. Furthermore, stakeholders highlighted the broader impact of the Bill, noting that while it primarily focused on amending the Pension Funds Act, it also affected other related laws such as the Government Employees Pension Law, the Post and Telecommunications Related Matters Act, and the Transnet Pension Fund Act. This broader scope of the Bill was acknowledged by NT, ensuring that amendments made were aligned across all relevant legislation, at the Committee’s approval.
    8. In summary, the stakeholders' feedback prompted National Treasury to carefully consider and address various concerns and requests regarding the Pension Funds Amendment Bill [B3-2024]. Through responses and proposed amendments, efforts were made to ensure clarity, fairness, and alignment with overarching legislative objectives, including the introduction of the two-pot retirement system and amendments to related pension laws.



    1. The Committee acknowledges the importance of the PFA Bill in incorporating necessary retirement reforms into the Pension Funds Act and other related retirement funds legislation, such as the Government Employees Pension Fund (GEPF), Transnet Pension Fund Act, and Post and Telecommunications Related Matters Act. The Committee recognizes the significance of the proposed "two-pot" retirement system in addressing current shortcomings, particularly regarding preservation of funds and access during financial distress.
    2. The Committee commends NT for facilitating a robust public participation process on the draft Bill, which saw substantial engagement from stakeholders representing various sectors and interests. However, the Committee recommends that future legislative processes involving significant reforms, such as those affecting retirement funds, should ensure early and thorough engagement with all relevant stakeholders, including formal referral to NEDLAC where appropriate.
    3. The Committee notes the interdependence between the Pension Funds Amendment Bill and the Revenue Laws Amendment Bill, particularly in facilitating the implementation of the two-pot retirement system. It acknowledges the necessity of aligning amendments proposed in the PFA Bill with corresponding changes in tax legislation to ensure coherence and effectiveness in achieving policy objectives.
    4. The Committee recognizes the diverse range of concerns raised by stakeholders during public hearings, including issues related to the scope of the Bill, treatment of deductions, clarity of terminology, and procedural matters. It notes NT's responsiveness in addressing stakeholder concerns, particularly regarding the preservation of retirement savings, equitable treatment across components, and clarity on definitions and effective dates.
    5. In response to concerns raised by stakeholders regarding potential conflicts with the Divorce Act, the Committee noted the need for clarity and consistency in the Bill. To address this issue, a solution was reached to insert an application clause in the Bill. This clause ensures that in the event of any conflict between the Pension Funds Act and related pension funds laws and the Divorce Act, the provisions of the Pension Funds Act and related pension funds laws would prevail. This solution aimed to alleviate stakeholders' concerns and ensure coherence between the proposed amendments and existing legislation, particularly in matters related to divorce proceedings and the division of pension interests.
    6. The Committee recommends continuous monitoring and evaluation of the implementation process post-enactment to identify any unforeseen challenges or gaps that may arise, ensuring that the intended objectives of the two-pot retirement system are effectively realized.
    7. In conclusion, the Committee acknowledges the significant progress made in refining the Pension Funds Amendment Bill [B3-2024] through extensive stakeholder engagement and iterative consultation processes. It recommends the adoption of the amended Bill [B3B-2024].

Report to be considered.