The talks around the new two-pot retirement system has been heating up as South Africa gears up to introduce the new regime to assist people with cash available in emergencies through access to their funds they have saved for retirement.
Will this revolutionise how people save manage and access their fund? Will all the administration be sorted out beforehand to enable the new system to continue?
The new system is set to start on 1 September 2024 where members with retirement funds will have their funds split into 3 pots. Why is it then called the two pot system?
There will be your past retirement savings and your new future savings, the future contributions will be divided into funds that are accessible (33% - Savings Pot) while the other continues in the retirement pot. These will be the future new pots while the past savings will sit in a vested pot while from this 10% of your past retirement savings will be used to start the savings pot capped at R30 000.
Things to note - there is a limit on the minimum withdrawal amount but withdrawals could be done on a yearly basis. ANY withdrawals WILL have an impact on your retirement savings and could pose quite a risk to your retirement plans. Additionally the tax consequences of these withdrawals should be considered!!
See attached additional reading material if you have further questions.
Thank you for sharing this information in an easy-to-understand way!
Helena Schoeman