Understanding the Pension Funds Amendment Act 2024

The Pension Funds Amendment Act 2024 is a significant piece of legislation that aims to enhance the efficiency and effectiveness of pension funds in South Africa. It was signed into law by the President in March 2024.

One of the key provisions of the Act is the introduction of a new regulatory framework for pension funds. This framework is designed to provide greater clarity and consistency in the regulation of pension funds.

The Act also introduces new rules for the appointment of fund managers and trustees. Fund managers must now meet specific qualification and experience requirements, and trustees must undergo regular training and evaluation.

The Pension Funds Amendment Act 2024 is a positive step towards improving the governance and oversight of pension funds in South Africa.

The Pension Funds Amendment Act, 2024, brought about several key changes to pension fund management. One of the major amendments was the increase in the mandatory retirement savings contribution rate.

Pension fund administrators were required to implement the changes within a specified timeframe, ensuring a seamless transition for members. This included updating their systems and processes to accommodate the new contribution rate.

The Act also introduced stricter regulations for pension fund managers, including enhanced reporting requirements and penalties for non-compliance. This is intended to improve the overall governance and transparency of pension funds.

Seed capital allocation and payment are crucial aspects of the Pension Funds Amendment Act, 2024. The act introduces a new framework for allocating seed capital to pension funds, which is now capped at 5% of the fund's assets.

According to Section 3.2, pension funds must allocate 70% of their seed capital to investments with a minimum 3-year holding period. This is a significant shift from the previous requirement, which had no such stipulation.

Pension funds must also pay seed capital to participating employers within 30 days of receiving the funds from the regulator. This is outlined in Section 4.1, which emphasizes the importance of timely payments to ensure the smooth operation of the pension system.

The act also requires pension funds to maintain a minimum seed capital reserve of 10% of their allocated funds. This reserve is meant to provide a cushion against market fluctuations and ensure the long-term sustainability of the pension system.

Pension funds must submit quarterly reports to the regulator detailing their seed capital allocation and payment. These reports must include specific information on investments, payments, and reserve balances, as outlined in Section 5.2.

The Pension Funds Amendment Act, 2024 falls under various categories, including Financial Sector, Labour Law, and Social Development.

The Act is part of the larger plan to implement two-pot retirement savings, which aims to preserve the largest portion of an individual's retirement savings for its intended purpose.

The new system will give pension fund members access to a portion of their savings without having to resign or cash out the entire fund, starting from 1 September 2024.

The Act was passed by Parliament in May 2024 and is expected to come into effect on 1 September 2024, as confirmed by a proclamation gazetted on 26 August 2024.

The Act was gazetted on 24 July 2024 and is not yet in force.

The Act requires pension funds to amend their rules, adjust their investment portfolios, and prepare administrative systems in anticipation of pension fund members applying to access portions of their funds from 1 September 2024.

Here are the key dates related to the Act: