Budget Speech 2024

The Budget contained a short summary of the two-pot reform. The Revenue Laws Amendment Bill, containing the two-pot system changes to the Income Tax Act is progressing through Parliament. It is through the National Assembly and will now go to the National Council of Provinces.  The Revenue Law Second Amendment Bill was issued on 21^st February 2024 and contained small technical amendments to the two-pot system.

The changes to the Pension Funds Act were published by the Minister of Finance at the end of January 2024. The Pension Funds Amendment Bill is also going through Parliament at the moment and is scheduled for the National Assembly at the end of March. The changes to the Pension Funds Act are mostly to align it with the two-pot system, but there are also some additional changes. We will issue a publication about this legislation shortly.

Treasury estimates that R5 billion is likely to be raised in 2024/2025 from tax collected as fund members, from 1 September 2024, access savings withdrawal benefits from their savings pots as a result of the once-off starting balance (seeded amount) in the savings pot. The seed capital transfer is a once‐off event, so this revenue will not continue into the following years.

Treasury states that policy research and engagement continue on the outstanding auto-enrolment, mandatory enrolment, and consolidation retirement reforms. The industry is waiting to see Treasury’s finalised auto-enrolment policy proposals. “Consolidation” appears to be a reference back to Treasury’s December 2021 paper entitled “Governance of umbrella funds”. The proposals included mechanisms to ensure funds were delivering value for money and to require consolidation where they were not.

Treasury will develop a national strategy on financial inclusion in 2024, based on its policy paper, entitled ‘An Inclusive Financial Sector for All’. The stated aim is to deepen financial inclusion for individuals, improve access to financial services for small, micro, and medium-sized enterprises, and enable diversification, competition, and innovation in financial services.

At the end of 2022, the Financial Sector Conduct Authority (FSCA) published a discussion paper, entitled ‘A Framework for Unclaimed Financial Assets in South Africa’. In order to make recommendations about the high levels of unclaimed assets, including unclaimed benefits in retirement funds. The FSCA is going through comments on the paper and will provide its response this year. The framework will concentrate on the identification, monitoring, management, and reporting of unclaimed assets, including tracing owners.

Currently, a pension or provident fund member who is over the early retirement age of 55, but has not retired, can transfer tax-free to, among other funds, a pension or provident fund, where this transfer is involuntary (for example a section 197 transfer of business requires the member to transfer to another fund). Currently, transfers in these circumstances, from one retirement annuity fund to another retirement annuity fund are not allowed tax-free. This is proposed to be amended to allow such a transfer.

At the end of 2022, the Financial Sector Conduct Authority (FSCA) published a discussion paper, entitled ‘A Framework for Unclaimed Financial Assets in South Africa’. In order to make recommendations about the high levels of unclaimed assets, including unclaimed benefits in retirement funds. The FSCA is going through comments on the paper and will provide its response this year. The framework will concentrate on the identification, monitoring, management, and reporting of unclaimed assets, including tracing owners.