The National Assembly has unanimously endorsed a bill that aims to reform South Africa’s pension laws to allow members to withdraw from a savings ”pot” before they reach retirement age.

The Pension Funds Amendment Bill is now a small step closer to becoming law, but will now be debated at the National Council of Provinces.

If approved there, it will be sent to President Cyril Ramaphosa to sign into law.

The Bill will require that funds be divided into components or “pots,” split between savings, retirement and a vested portion.

It will also allow members to transfer or withdraw savings in the event they change or lose their job. Fund members can choose if they want to opt into the new system.

Deputy Finance Minister David Masondo says in times of financial distress, members of pension or provident funds tend to terminate their employment in order to access their retirement savings.

With these new reforms, it will allow members to withdraw a portion, up to a third, of their retirement savings, while still preserving funds.

A ratio of 1/3 (one-third) of total contributions will go into the savings component and 2/3 (two-third) of total contributions into the retirement component.

The withdrawal of retirement savings would however be subject to tax.

It is envisaged that the Bill will become law from 1 September 2024. It was initially meant to come into effect from 1 March 2024, but it was hit by several delays and industry concerns. 

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