The Financial Sector Conduct Authority (FSCA) has launched a national Know Your Rights campaign to educate the public about the two-component retirement system. The two-component (two-pot) system is set to go live on 1 September 2024.
The FSCA’s communications campaign will focus on an introduction of the two-component retirement system and other aspects of retirement funds regime such as consumer rights, the contributions made into the retirement fund and the recourse available to consumers when they face challenges such as where employers fail to make the contributions to the retirement fund.
The FSCA previously issued communication of a similar nature on 1 September 2023 and 26 March 2024, which included names of employers that defaulted on retirement fund contributions.
On 1 June 2024, President Cyril Ramaphosa signed the Revenue Laws Amendment Bill into law, putting into place the framework for the two-component retirement savings system which intends to promote the preservation of retirement fund investments until members retire, whilst allowing them to access a portion of their accumulated savings once per year to provide access to funds in cases of emergencies by members who are in financial distress.
The Know Your Rights campaign will explain how Pot 1 (savings pot) will cater for the savings withdrawal component to which one-third (1/3) of the contributions will be allocated. The savings pot may be accessible to the members once a year subject to a minimum withdrawal of R2000, taxed at normal marginal tax rates and will attract other administrative fees. Pot 2 is the compulsory retirement pot of which two-thirds (2/3) of the retirement contributions is applied as a compulsory retirement saving to be used to fund the annuity until the members eventual retirement. The system will become effective from 1 September 2024, where all retirement savings accrued up to that date will be ringfenced and continue to be subject to the pre-1 September retirement regime rules. This is known as the vested pot and comprises of members retirement fund contributions up to 31 August 2024.
The Know Your Rights campaign seeks to ensure that employees making retirement contributions are aware of their rights and the impact of the changes brought about by the two-component system. The FSCA is collaborating with the financial industry and other key stakeholders to ensure that this campaign reaches as many South Africans as possible who are members of retirement funds.
The FSCA’s multi-channel communications campaign started on 1 July 2024 and will run until 30 September 2024.