TWO POT RETIREMENT SYSTEM EXPLAINED
The “two-pot” system was established by The Revenue Laws
Amendment Bill (the Bill) Through this system, you will have access to a
portion of your retirement savings without you needing to cash out or resign
from the entire pension fund.
The Bill that was signed into law by President Cyril
Ramaphosa, and will take effect from 1 September 2024.
The two-pot retirement system will allow South Africans to
access a portion of their retirement savings for emergencies.
One third of
retirement funds are preserved in a savings component that can be accessed at
any point in time, while the remaining two-thirds are reserved
for retirement, ensuring financial security.
To access your retirement component, you must be at least 55
years of age, and the full amount must be paid in the form of a retirement
annuity.
The two-pot retirement system aims to help South Africans
manage financial stability and flexibility. It allows partial withdrawals for
emergencies while protecting most of the savings for retirement. This aims to
address past challenges where people could cash out their full pension savings
when changing jobs, leaving nothing for retirement.
INVESTEC
Paul McKeaveney, Portfolio Manager, Investec Investment Management.
The ability to access retirement savings for emergencies is
an understandable and necessary change for savers. However, given that most
South Africans don’t save enough, savers will be responsible for balancing
their short- and long-term needs. This reform will ultimately put more pressure
on meeting one’s longer-term goals all things equal.
The two-pot retirement system can assist
you spare more for retirement, ensure your
retirement investment funds, and make way
better retirement arranging choices.
The investment funds component gives you to get a
few of your retirement savings in an emergency. This may assist
you dodge dipping into your retirement savings too early, which
can diminish the sum of cash you have
got accessible after you resign.
The retirement system is bolted absent until
you resign. This makes a difference ensure your
retirement investment funds from being gotten to as
well early or misplaced due to monetary hardship.
COSATU
Workers
have been fed all types of mistruths such as the system is a ‘Mashonisa’ scheme
through which government plans to steal their pensions; some public sector
workers have been told that if they withdraw funds out of their existing
retirement fund as the Two-Pot system allows, their years of service with the
employer will be reduced. This couldn’t be further from the truth because the
Two-Pot system was designed with workers in mind; to bring relief to the
millions of workers who are drowning in debt and make sure they do not retire
in poverty.