Regulatory update for retirement funds
Two-pot system
The Revenue Laws Amendment Bill (“RLAB”) (containing the two-pot system changes to the Income Tax Act) went to the Minister of Finance for a response to the Standing Committee on Finance (“SCOF”). The Minister recommended 1 September 2024 as an implementation date and SCOF accepted this date. The RLAB must now go to the National Assembly and thereafter the National Council of Provinces for concurrence. Both the RLAB and Pension Funds Bill (containing amendments to the Pension Funds Act related to the two-pot system) will be tabled on 8 February 2024 when Parliament re-convenes.
The FSCA intends to publish a Guidance Notice (or other instrument) in December 2023 setting out the principles of what should be in the fund rules to address the two-pot system.
Conduct of Financial Institutions Bill (“COFI”)
COFI contains far-reaching changes for financial institutions, including retirement funds. National Treasury has received the final certificate to request Cabinet to approve the introduction of COFI to Parliament, however, National Treasury has yet to receive the required certification from the State Law Advisor. COFI remains a priority and National Treasury aims to introduce it to Parliament in the first quarter of 2024. The implementation of the COFI requirements will be phased-in and there will not be a big bang approach.
The Omni Conduct of Business Return
As a reminder, The FSCA issued its draft Omni Conduct of Business Return (“Omni CBR”) in June 2022. This was the first phase in a process that was designed to end in June 2026, with many financial institutions, including retirement funds, administrators and Financial Services Providers, submitting online quarterly answers (returns) to the FSCA on an extensive list of questions (risk indicators). This will be the cornerstone of the FSCA’s supervisory approach.
Recently, the FSCA published Communication 33 of 2023 ‘Update on roll-out and implementation of cross-sectoral Conduct of Business Return for financial institutions’, which provides that the FSCA will issue an updated timeline for the roll out of the Omni CBR in 2024 (with updates being provided in July 2024).
The FSCA provided times for certain actions as follows, which times may change depending on when COFI is enacted:
- continuation of industry engagements on the current version of the Omni CBR until 1 April 2024;
- publishing a revised version of the Omni CBR spreadsheet template by 1 July 2024;
- publishing an industry survey on the impact of the revised Omni CBR by 1 July 2024;
- launch of the industry pilot in the second half of 2024.
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