RETIREMENT MATTERS 4 OF 2025
The 2025 draft tax bills
The 2025 draft Taxation Laws Amendment Bill (TLAB) and draft Tax Administration Laws Amendment Bill (TALAB) were published on 16 August 2025 for comment by 12 September 2025.
The proposed changes relating to retirement funds, which will come into operation on 1 March 2026 (unless indicated otherwise), are as follows:
Two-pot related
- Death Benefits
For tax purposes, the death of a fund member is treated similarly to retirement. However, it has come to the attention of National Treasury that the savings component payable to beneficiaries as part of a death benefit is often treated as a savings withdrawal benefit and therefore taxed as ordinary income (at marginal rates).
The intention remains that beneficiaries have the flexibility to elect a lump sum or annuity payment. The TLAB proposal clarifies that death benefits payable as a lump sum from all three components qualify for tax purposes as retirement fund lump sum benefits, taxable at favourable lump sum tax rates.
This amendment will be back-dated to 1 September 2024.
- Savings withdrawal benefit when membership is terminated
A member whose membership is terminated, will be able to withdraw the balance of their savings component, notwithstanding the fact that it is less than R2 000 or if the member had taken a savings withdrawal benefit in that same tax year.
- Once-off withdrawal from the vested component by a member of a preservation fund upon ceasing to be a tax resident
The definitions of “pension preservation fund” and “provident preservation fund” in the Income Tax Act will be amended to clarify that provided that a member of a preservation fund has not yet made a once-off withdrawal from the vested component, they do not have to be non-resident for three years before being able to make a withdrawal from this component. In other words, the three-year requirement only applies where the member has already made a once-off withdrawal.
Other proposals
- Taxation of divorce rewards under religious tenets
The amendments to the Pension Funds Act with regards to section 37D, which was promulgated together with the two-pot system changes, made it possible for former spouses to also claim a portion of the member’s pension interest in terms of the tenets of a religion, for example where Muslim marriages are dissolved.
However, the Income Tax Act has not been similarly updated and does not include such orders, which created tax uncertainty.
The TLAB proposes that similar wording be added to the Income Tax Act to deal with the tax treatment of those amounts assigned to former spouses under the tenets of a religion.
- Exemption of child maintenance payments
When the taxation of maintenance payments from a retirement fund was changed in 2008 to ensure that maintenance payments are treated as ordinary income for PAYE purposes in the hands of members (and not in terms of retirement fund tax), the exemption for maintenance payments not made by retirement funds was erroneously removed. The policy is that maintenance payments should not be taxed in the hands of the recipient.
The TLAB proposes a change to ensure that ordinary child maintenance payments funded from after-tax income remain tax-exempt in the hands of the recipient of the maintenance payment. This proposal does not affect the tax treatment of maintenance payments by retirement funds.
- Cross-border tax treatment of retirement funds
Any lump sum, pension or annuity received by or accrued to a resident from a source outside South Africa, is currently tax exempt if that amount accrued as consideration for past employment outside of South Africa. This exemption applies to persons who are or become South African tax residents, but who worked abroad and contributed to a foreign retirement fund.
Where the foreign jurisdiction taxes the retirement income, whilst the double tax agreement grants South Africa the taxing rights, income to the fiscus is forfeited due to this exemption.
The TLAB proposes to delete this exemption to ensure that foreign retirement benefits received by a resident are appropriately taxed in accordance with the residence basis of taxation, and upholding South Africa’s treaty rights to tax.
FSCA-related matters
Report of two-pot related costs and fees
The FSCA issued a report on two-pot related costs and fees on 27 May 2025, after their questionnaire to administrators and funds during the latter part of 2024. The FSCA indicated that they are looking into fee fairness and would engage with fund administrators who are charging excessive fees and those not investing adequately in the system.
Noteworthy findings from the report:
- The overall once-off cost of implementing the two-pot retirement system is estimated to be R1.6 billion.
- The FSCA found the average cost per member was R252.
- 65% of costs to administrators were related to system upgrades, followed by 20% for staff costs followed by costs relating to member communication.
- Most administrators and funds are recouping these costs through increases in ongoing monthly administration fees or as a transaction cost on the savings withdrawal benefits or as a combination of these funding mechanisms.
- Some administrators absorbed these costs themselves, and it may reflect as higher costs in future.
- Some administrators have charged a once-off fee.
- Savings withdrawal transaction fees varied widely across administrators: 28 administrators are charging no withdrawal fee, 37 are charging flat fees ranging from R50 to R500 (average of R278) and 12 are charging variable fees, mostly ranging between R100 and R350 and some charging up to R750.
- 51% of administrators that currently charge a savings withdrawal fee, indicated that they would consider reducing this fee in future.
FSCA Conduct Standard 2 of 2025 (RF): Conditions prescribed in respect of pension fund benefit administrators
The FSCA has published Conduct Standard 2 of 2025 on section 13B administrators on 6 August 2025. This Conduct Standard replaces Board Notice 24 of 2002.
The Conduct Standard attempts to strengthen the existing framework governing retirement fund administrators to ensure that, amongst other things, specific fundamental conduct risk areas are addressed. The Conduct Standard balances outcomes-, principles- and rules-based requirements to ensure that administrators deliver fair customer outcomes in a disciplined, transparent and consistent manner. The Conduct Standard repeats some of the conditions that were prescribed in Board Notice 24 of 2002 such as conditions pertaining to administration agreements (including termination of such agreements) indemnity, fidelity guarantee insurance, and maintenance of current assets. The requirements relating to these conditions are however expanded on. The Conduct Standard also includes conditions that were not dealt with in Board Notice 24 of 2002 such as business and governance, changes in business information, fit and proper requirements, conflicts of interest and communication, disclosures and complaints management.
In summary it addresses the following:
- General governance and business principles
Benefit administrators must conduct business in a manner that promotes fair treatment of customers, transparently, honestly, fairly with integrity, and due skill, care and diligence. It must deal with the FSCA in an open, accountable and cooperative manner.
Customers of the administrator (defined as retirement funds) should be given clear, timely, and appropriate information, and be kept appropriately informed. There should be no post-contracting barriers, such as barriers relating to terminating administration agreements, switching benefit administrators and submitting complaints.
- Key persons and management
The FSCA must be notified of the appointment or termination of a director, senior manager, or head of a control function, together with reasons for the termination, within 30 days of such appointment or termination occurring. The FSCA may object to such appointment.
Key persons must meet specific qualifications and experience criteria, and must be persons of good standing, with honesty and integrity being paramount.
The FSCA may direct the administrator to take steps should a key person not comply.
- Agreements
Administrators must enter into both administration agreements and service level agreements with funds prior to rendering any administration services for a fund. The agreement must include a clear and effective communication and reporting procedure and the manner and frequency of review of the service level agreement, which must be regular.
The Conduct Standard provides guidelines on actions to be taken upon termination of an agreement.
- Outsourcing
Outsourcing of administration responsibilities may only be done if included in the agreement and if the administrator retains oversight and responsibility.
- Conflicts of Interest
Administrators must identify, disclose, and manage conflicts within their management to protect fund members and must develop and maintain a conflict-of-interest policy. Employees must be trained on the policy.
- Communication and disclosure
All communications and disclosures to funds must be in plain language; timely, relevant and complete; factually correct and not misleading or deceptive; promote understanding of the financial service being provided; and take account of the needs and circumstances of the fund.
- Complaints management
A complaints management framework must be developed and implemented to ensure the effective resolution of complaints and the fair treatment of complainants. There must be appropriate performance standards, record keeping, analysis of complaints and identification of risks and responses thereto. Escalation and review procedures must be in place and communication with complainants must be regular and clear.
- Data management and record keeping
Appropriate strategies, policies, systems, processes and controls must be in place. Communications with members and beneficiaries, including former members, must be stored safely and retrieval must be possible.
- Financial soundness
Administrators must maintain adequate financial resources to meet obligations.
- Implementation dates
The implementation of the Conduct Standard will follow a phased approach, with the greater part of the Conduct Standard coming into operation on the date of publication, 6 August 2025. Certain parts thereof will however only come into operation 6 or 12 months after the date of publication.
The obligations of the governing body, governance arrangements, conflict of interest management, communication, disclosures and complaints management and operational ability will come into operation 6 months from publication, i.e. 6 February 2026.
The administration and services level agreement, termination of administration agreement, outsourcing of administration services and management, oversight and review of outsourcing arrangements will come into operation after 12 months, i.e. 6 August 2026.
FSCA RF Notice 8 of 2025: Exemption of retail funds in relation to amalgamations and transfers from the requirements of Section 14(1) of the Pension Funds Act
The FSCA has published the final exemption notice on 14 July 2025.
The FSCA exempts the following transactions from the requirements of section 14(1):
- transfers between retirement annuity funds;
- transfers between preservation funds; or
- transfers from a preservation fund to a retirement annuity fund.
These transactions will be exempt on the basis that they meet the following conditions:
- The records of the transfer must be maintained by both funds and made available to the FSCA on request;
- The provisions and the rules of the relevant funds must be complied with;
- The prescribed forms must be completed and certified, but it does not have to be submitted to the FSCA;
- Proof of member communication, how objections have been addressed and that the surplus requirements of the funds have been complied with;
- The assets and liabilities are transferred within 180 days of the effective date of transfer; and
- Any assets transferred must be increased or decreased with fund return from the effective date until the date of final settlement.
Update on implementation of cross-sectoral Conduct of Business Return (Omni-CBR)
The FSCA issued Communication 12 of 2025 on 11 June 2025 to provide an update on the Omni-CBR rollout plan.
The FSCA has adopted a new and enhanced technology platform, namely the Integrated Regulatory Solution (IRS).
Implementing the IRS has provided the FSCA with the opportunity to re-think the supervisory data collection model initially contemplated under the Omni-CBR. Consequently, the Omni-CBR will no longer be rolled out in the format and manner previously communicated by the FSCA.
The first component of the revised approach will be the introduction of an Omni-Risk Return to support the automated Risk Model (or risk engine) that forms the core of the IRS. The FSCA is currently finalising the refinement of the Omni-Risk Return and its integration onto the IRS. This is being prioritised for further industry engagement in the upcoming months.
The second component of the revised approach will be to reconsider what additional sector-specific data is required from different financial institutions at a more granular level for other ongoing supervisory and regulatory purposes beyond the Omni-Risk Return and other existing reporting, as well as the frequency and means of collecting such data.
The FSCA issued a detailed communication and engagement plan on 30 September 2025 regarding the IRS, the revised Omni-Risk Return and a clearer timeline for overall implementation. It is envisaged that consultation on the draft Omni-Risk return will take place from 1 October 2025 until 30 November 2025. The FSCA is also planning industry workshops during November 2025. Details around a planned industry pilot for testing of the IRS and the anticipated go-live date of the new platform will also be provided.
The FSCA confirmed that financial institutions are not expected to initiate or progress any internal Omni-CBR related initiatives or system development and implementation efforts until this further communication is issued on the roll-out of the IRS and Omni-Risk Return.
Joint Communication 2 of 2025 – Cloud computing and data offshoring
The FSCA and the Prudential Authority (the Authorities) issued Joint Communication 2 of 2025, informing financial institutions, which will include retirement funds once the CoFI Bill is introduced, of their intention to issue a Joint Standard regarding the use of cloud computing and data offshoring.
In the interim, the Authorities through this communication, seek to clarify expectations insofar as they relate to financial institutions utilising cloud computing and/or the offshoring of data.
Recommended Best Practice Regarding Cloud Computing and Data Offshoring
Financial institutions will be expected to adopt a risk-based approach tailored to their size, complexity, and risk appetite.
Financial institutions should set up clear rules and responsibilities for using cloud services.This includes having:
- A formal policy,
- A board-approved data strategy, and
- A framework for managing data that reflects the institution’s risk tolerance for cloud and data storage outside the country.
They must also take reasonable steps to keep data private, make sure it stays accurate and secure and ensure systems and applications are always available when needed.
Financial institutions should give due consideration to contractual and other legal requirements for these services and the enforceability of rights and obligations arising from these contractual arrangements.
When making strategic investments in the use of cloud computing and/or data offshoring, financial institutions are expected to exercise appropriate due diligence before concluding such strategic investments.
Joint Communication 3 of 2025 – Draft Notification template to report cyber incidents
The FSCA and the Prudential Authority (the Authorities) issued Joint Communication 3 of 2025 and Draft Joint Notice on 3 September 2025 setting out the draft template to report material cyber security incidents for comments.
The draft template sets out the information to be submitted to the Authorities by a financial institution when an IT and/or cyber incident is classified as material in terms of Joint Standard 1 of 2023 – IT Governance and Risk Management for financial Institutions and Joint Standard 2 of 2024 – Cybersecurity and Cyber Resilience Requirements for Financial Institutions.
The template will be accessible on the FSCA’s website, and for retirement funds it must be submitted to ITandCybernotification@fsca.co.za
Comments on the draft template must have been submitted to the Authorities by 5 October 2025.
Information regulator matters
Notice from Information Regulator: Non-compliance with PAIA forms
The Information Regulator (IR) has sent a letter informing information officers of the continued use of the repealed PAIA request Form A by private and public bodies. Form A was repealed in 2021 and a new form to request for access to a record was published by the IR, i.e. Form 2.
Use of the incorrect form amounts to non-compliance with the regulations.
Other retirement industry developments
Institute of Retirement Funds Africa (IRFA) conference
The IRFA Conference 2025 was held in Cape Town from 24 to 26 August 2025.
The theme of the conference was Leading Change for a Positive and Lasting Impact.
The conference highlighted the urgent need for reform in South Africa’s retirement industry, driven by the imperative to create lasting social impact and improve member outcomes. Across panels and presentations, it was evident that while progress has been made, systemic challenges persist. Employment insecurity, low contribution rates, and lack of trust between stakeholders underscore the need for bold, coordinated action.
Reform must be holistic, addressing not only financial mechanisms but also the broader social system, with lessons drawn from global models like Australia’s phased approach to coverage and savings culture.
Infrastructure investment emerged as a key lever for economic growth, yet less than 3% of Africa’s retirement assets are allocated to it, despite its potential to uplift communities and deliver predictable returns. ESG and impact investing were positioned not as optional add-ons but as strategic imperatives, requiring trustees to move beyond compliance and embrace purpose-driven governance.
Member engagement, transparency, and financial literacy were repeatedly emphasised as foundational to reform. Ultimately, the conference called on industry leaders, policymakers, and labour to collaborate more effectively, innovate boldly, and act swiftly to reshape the retirement landscape for a more inclusive and resilient future.
Regulatory feedback from the FSCA at the conference
- CoFI Bill
Under the CoFI Bill, participating employers will also fall under the FSCA’s remit, albeit to a limited extent. This will assist the FSCA to monitor and take regulatory action against participating employers in respect of arrear contributions.
In preparation for the CoFI Bill, fund administrators should ensure that they have up-to-date information available on participating employers. Funds should also alert participating employers of the FSCA’s oversight that is envisioned.
- Termination of funds project
The cancellation process has been revised and was successfully tested. This will be rolled out soon.
Complex termination cases may be referred to Terminations.SpecialProject@fsca.co.za.
- Trustee Toolkit
The FSCA found that 20% of trustees did not complete the toolkit. They will start taking regulatory action against the non-compliant trustees in October 2025. Their focus will initially be on trustees of active funds.
- Retirement fund expenses
The FSCA will be focusing on fund expense monitoring during the next year, although they have not decided on the format yet.
- Compliance with Cyber Security Joint Standard
The FSCA’s monitoring will initially focus on the implementation, and they have appointed an external party to assist them with that.
Pension interest in the case of marriages out of community of property and without the accrual system
In terms of section 7(7)(a) of the Divorce Act, the pension interest of a party to a divorce action is deemed to be part of their assets. A pension interest allocation can however not be made in the case of a marriage entered into on or after 1 November 1984 out of community of property and without the accrual system. The General (Family) Laws Amendment Bill, which was introduced in Parliament on 13 August 2025, proposes enabling that a pension interest allocation also be made in the case of a marriage entered into on or after 1 November 1984 out of community of property and without the accrual system.
Q&A
Q: May a member of a retirement annuity fund transfer their benefit in the retirement annuity fund to a pension fund or provident fund?
A: Members of a retirement annuity fund cannot transfer their benefit to a pension fund or provident fund, because benefits in the vested component of those types of funds are accessible when you leave employment before retirement and benefits in a retirement annuity fund are only accessible before retirement, under very limited circumstances. A transfer from a more restrictive vehicle to a less restrictive vehicle is not allowed.