Provident and provident preservation fund members who were 55 or older on 1 March 2021 could elect not to participate in the two-pot system and retain only a vested component. If they wished to participate, they had to opt in before 1 September 2025.
On opting in, a one-time seeding amount of 10% of the vested component value had to be calculated at the seeding date. Two prior acts set conflicting dates for this calculation:
Both dates had already been embedded in fund rules, and administrators built systems accordingly. The RLAA amends the definition of "savings component" to accommodate both dates, stating that the seeding amount must be calculated as at 31 August 2024 or the last day of the month in which the election was made, or as may be determined by the rules of the fund.
The definition is also clarified to confirm that provident preservation fund members who were 55 or older on 1 March 2021 do not need to have remained in the same fund in order to be excluded from the two-pot system.
The Income Tax Act defines a member's interest in each of the three retirement components (retirement, savings, and vested). These definitions provide for proportionate deductions of amounts payable under section 37D of the Pension Funds Act, which covers maintenance orders, interim maintenance orders, and the tax payable on such deductions.
Prior to the RLAA, these deduction references were inconsistently applied across the three component definitions. Specifically:
The RLAA corrects these omissions so that all section 37D deductions — including interim maintenance [s37D(1)(d)(iB)] and tax on deductions [s37D(1)(e)] — are applied proportionately and consistently across all three component definitions.
Effective: Deemed to have come into operation on 1 September 2024The RLAA clarifies how the R165,000 de minimis threshold applies on retirement for retirement annuity fund members. A member must annuitise at least two-thirds of their non-vested benefit in their vested component and their total retirement component on retirement. However, if the combined value of those two amounts is R165,000 or less, the member may take the full retirement benefit as a lump sum.
The amendment explicitly includes the total member's interest in the retirement component in this calculation, which was previously ambiguous.
Effective: Deemed to have come into operation on 1 March 2025 — applies in respect of years of assessment commencing on or after that dateThe RLAA also amends the de minimis calculation to base it on two-thirds of the member's vested component value rather than the full vested component. However, this is a drafting error: when determining the one-third that may be taken as a lump sum on retirement, the vested benefit is calculated from the full vested component, not two-thirds of it.
Prior to the RLAA, the exclusion from the two-pot system for over-55 members required that a person still be a member of the same provident or provident preservation fund. This "same fund" continuity requirement made sense for provident fund members (aligning with the 2021 annuitisation rules), but was not justified for provident preservation fund members.
The RLAA removes the same-fund requirement for provident preservation fund members. Under the amended definition, a provident preservation fund member is excluded from the two-pot system (unless they opted in before 1 September 2025) if they meet both of the following criteria:
For provident fund members, the same-fund continuity requirement is retained.
The original legislation provided for how the savings component should be dealt with on retirement, but contained no provision for what happens to it on the member's death. The RLAA addresses this gap.
The member's nominee or dependant may choose to receive the savings component as a lump sum benefit. The death benefit is paid as a whole (all three components together), and a beneficiary can choose to receive their allocated portion as:
Any lump sum portion is deemed to have accrued to the member immediately prior to death and is taxed in the member's hands on the retirement fund lump sum benefit tax table. The resulting tax is deducted from the lump sum paid to the beneficiary.
The existing treatment is retained: the member may take the savings component as a lump sum (taxed on the retirement fund lump sum benefit tax table) or add any part of it to the retirement component to use for the purchase of an annuity.
Paragraph (c)(iii) of the definition of "provident preservation fund" governs pre-retirement withdrawals from a member's vested component. It references paragraph 2(1)(b)(ii) of the Second Schedule, which relates to lump sum benefits taxed on the retirement fund lump sum benefit tax table. This does not include a savings withdrawal benefit (which is taxed at the member's marginal rate). The erroneous reference to "or a savings withdrawal benefit" at the end of paragraph (c)(iii) is deleted, aligning the definition with the equivalent provision in the "pension preservation fund" definition.
Paragraph (c) of the definition of "retirement component" already allowed for the transfer of a member's retirement component from one fund to another. The RLAA inserts a new paragraph (cA) to also permit the transfer of amounts from a member's savings component or vested component in a transferring fund into the retirement component of the receiving fund. This aligns the legislation with existing fund rules and with SARS practice.
Effective: Deemed to have come into operation on 1 September 2024