Members of pension funds have been urged to seek clarification from their funds regarding their benefits under the two-pot retirement system in order to safeguard their benefit entitlement.
Pension fund rules and administrative systems will have to be amended to fall in line with the two-pot retirement system, the Office of the Pension Funds Adjudicator (OPFA) said.
“The Pension Funds Amendment Bill has been signed into law, clearing the way for the implementation of the two-pot retirement system which provides for a vested component, savings component, and a retirement component.
“Generally, members’ contributions from September 1, will be split between the savings component and the retirement component,” the OPFA said.
The vested component will consist of the member’s contributions in the fund up to August 31, 2024.
From this component, 10% or R30 000, whichever is lower, will be utilised as a once- off seed capital amount in the savings component, which can be claimed from September 1, 2024, the OPFA explained. The vested component will be subject to existing retirement laws, allowing a member to claim a withdrawal benefit from this component when they resign from employment.
The savings component will consist of the once-off seed capital amount and one-third of the member’s contributions in the fund from September 1, which can be accessed once every tax year by the member.
The retirement component will consist of two-thirds of the member’s contributions from the implementation date and can only be accessed at retirement.
The OPFA noted that its role is to investigate and determine complaints relating to the improper application of fund rules, maladministration, disputes of fact or law, and employer dereliction of duty in respect of pension funds.
“The two-pot retirement system requires pension funds to amend their rules and adjust their administrative systems to allow pension fund members to access a portion of their retirement benefits from September 1,” the OPFA said.
The role of the OPFA in a complaint relating to the two-pot system is to apply the fund rules and ensure that funds comply with their administrative process in this regard.
“If the rules of a fund do not afford a fund the legal power or capacity to do something, then such purported act by the fund is ultra vires and accordingly null and void. Therefore, if a fund fails to amend its rules to provide for the two-pot retirement system, then the OPFA cannot grant relief in this regard.”
The OPFA said there is a fiduciary duty on funds to act in the best interest of their members and provide them with relevant and adequate information.
“Funds should ensure that they amend their rules and embark on a communication exercise to inform members of their benefits and the implications of the two-pot retirement system.
“There is a corollary duty on members to seek information from their funds regarding their benefits entitlement relating to the two-pot system in order to exercise and protect their rights and benefit entitlement.”
“In view of our Refer to Fund (RTF) process of adjudicating complaints, we encourage funds and members to resolve these types of complaints at an early stage by sharing information regarding what is payable in terms of the fund rules, turnaround times and any challenges that a fund may be experiencing in implementing the two-pot system.
“This will minimize unnecessary complaints before the OPFA which could have been resolved quicker and earlier if there was clear communication.”
The OPFA also expects funds to resolve complaints relating to claims for payment to be resolved at an early stage if members do not qualify to access the once-off seed capital amount in the savings component in terms of the fund rules.
“Members are encouraged to contact their funds to enquire about their benefits from September 1. The OPFA will monitor complaints trends in this regard and alert the industry of any shortcomings in relation to the implementation of the two-pot system. Continuous engagements with stakeholders will be strengthened in this regard to minimise unnecessary complaints.”
Cape Times