Retirement reform: Draft legislation for the two-pot system
The National Treasury released the set of four draft Tax Bills for public comment on 29 July 2022, which give effect to the 2022 Budget tax proposals. These include the 2022 Draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill (2022 Draft Rates Bill), the 2022 Draft Revenue Laws Amendment Bill, the 2022 Draft Taxation Laws Amendment Bill (2022 Draft TLAB) and the 2022 Draft Tax Administration Laws Amendment Bill (2022 Draft TALAB).
The 2022 Draft Revenue Laws Amendment Bill contains key amendments on retirement reform to move towards a “two-pot” retirement system. The amendments enable South Africans to also save for non-retirement purposes (e.g. emergencies) via their retirement funds, whilst preserving more of their savings for retirement. These amendments aim to encourage members to preserve their retirement savings by making it more flexible to accommodate unforeseen pressures that members face during the span of their working life. It makes it possible for workers not to resign from their employment merely to access their retirement funds and would have assisted members during a crisis like the COVID-19 pandemic, when many employees faced reduced salaries or were not paid at all during that time.
The legislative proposals follow an intensive process of consultations, where various risks, challenges and possible perverse outcomes were identified. These amendments are the culmination of several years of consultations and engagements that took place between National Treasury, Labour, and Business stakeholders, and reflects input received from the public after the release of the discussion paper Encouraging households to save more for retirement in December 2021. The amendments are technically complex, as they attempt to fit a pre-retirement withdrawal scheme into existing retirement savings vehicles primarily meant to cater for long term savings.
Process to enact Bills following public comments
The process for enacting any amendments following publication involves taking public comments. After receipt of written comments, National Treasury normally engages with stakeholders through public workshops to discuss the written comments on the draft bill. The Standing Committee on Finance (SCoF) and the Select Committee on Finance (SeCoF) in Parliament are expected to make a similar call for public comment and
convene public hearings on the 2022 draft bills before their formal introduction in Parliament. Thereafter, a response document on the comments received will be presented at the Parliamentary committee hearings, after which the bills will then be revised, taking into account public comments and recommendations made during committee hearings, before they are introduced formally in Parliament for its consideration.
Due date for public comments on the 2022 Draft Revenue Laws Amendment Bill
National Treasury hereby invites comments in writing on the 2022 Draft Revenue Laws Amendment Bill and all other draft tax bills. Please forward written comments to the National Treasury’s tax policy depository at 2022AnnexCProp@treasury.gov.za and SARS at firstname.lastname@example.org by close of business on 29 August 2022. Comments and queries on the proposed two pot system should also be sent to email@example.com.