The Retirement Benefits Act 3 of 1997 (Retirement Benefits Act) is an act that establishes the retirement benefits authority and provides for the rules and guidelines that employers should comply with and employees should be aware of, with respect to retirement benefits schemes.
On 12 July 2021, the Cabinet Secretary to the Ministry of Finance made changes to the Retirements Benefits Act that affect the access that employees have to their contributions, specifically for early retirement and withdrawal from the certain retirement schemes. These changes have been necessitated by the following legislated regulations:
- the Retirement Benefits (Occupational Retirement Benefits Schemes) (Amendment) Regulations;
- the Retirement Benefits (Umbrella Retirement Benefits Schemes) (Amendment) Regulations (Umbrella Regulations); and
- the Retirement Benefits (Individual Retirement Benefits Schemes) (Amendment) Regulations (Individual Regulations).
The Regulations of the Retirement Benefits Act initially provided that on early retirement, an employee had the option to request either:
- their contributions and 50% of their accrued benefits; or
- their contribution and 50% of the employer’s contribution and the investment income that had accrued in respect of those contributions.
The position has now been changed by the new regulations to provide a member with only one option of claiming not more than 50% of their total accrued benefits and the investment income that has accrued in respect of those contributions.
The Individual Regulations go a step further and provide that where an employee makes their own contributions they may opt for payment of their total accrued benefits and the investment income that accrued in respect of those contributions.
Further, the Umbrella Regulations have been amended to introduce a prohibition on the withdrawal of membership. A member who withdraws their membership with a particular retirement scheme but still remains an employee of the employer is prohibited from withdrawing their membership from a scheme while still in active employment with that employer. However, the withdrawal is permitted for members who withdraw their membership to join another scheme established for the benefit of employees of that employer.
It is important for employees and employers to be aware of these amendments as they affect access to their retirement benefits. We urge employers to notify their employees and retirement benefit schemes to notify their members of these amendments so as to avoid future misunderstanding.
Read the original publication at Cliffe Dekker Hofmeyr