Two-pot retirement system withdrawals capped at R30 000
The ‘Two Pot’ retirement system comes into force on 1 September, changing how South Africans can access their retirement funds.
Retirement planning, breaking into piggy bank savings. Picture: 123rf.com
John Maytham speaks to renowned personal finance journalist Maya Fisher-French about the 'Two Pot' retirement system.
Listen below.
Last month, President Cyril Ramaphosa signed the Revenue Laws Amendment Bill into law.
The amendment introduces the two-pot retirement system, enabling employees to access limited portions of their pensions without resigning.
The system effectively changes the way South Africans will be able to access their pension funds.
The new system splits a pension fund into an accessible 'emergency pot' while a bigger portion (2/3) will continue to be locked away in retirement savings.
"What they've actually done, if you really think about it, is they've introduced mandatory preservation, which is the opposite of what people are thinking."
- Maya-Fischer French, Registered advisor/financial journalist
"For the first time, people will not be able to access their full pension when changing jobs."
- Maya Fischer- French, Registered advisor/financial journalist
Fischer French says this is going to have a significant impact on an individual's retirement funds.
"Up to now, about 90% of people, especially younger people, cash in when they change jobs."
- Maya-Fischer French, Registered advisor/financial journalist
This massive reform to retirement funds comes into force on 1 September 2024.
Many people are expected to access funds from the Savings Pot on that date, but Fischer-French says it's important not to think of it as a windfall.
While some of the vested funds will be transferred to a savings account which can be accessed ahead of retirement, there will be restrictions.
"It's 10%, to a maximum of R30 000. So, if you've got R1 million, it's not R100 000... it has been very cleary capped... it's a very small withdrawal."
- Maya-Fischer French, Registered advisor/financial journalist
"50% of people [with savings] don't even have enough to get the R30 000."
- Maya Fischer-French, Registered advisor/financial journalist
Fischer-French says it's also important to remember that you WILL be taxed on any withdrawal from the savings pot.
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Scroll up to the audio player to listen to the interview.