Impact of two-pot system may be detrimental to savings – Financial Planner

The two-pot retirement system gives quick relief to desperate South Africans, but does not help with long-term savings gaps.

Many have withdrawn from their funds to fix an immediate issue such as bills or debt.

However, this stops their funds from growing in the future and they will end up with a financial shortfall when retirement comes.

Additionally, Sanlam found that many of those who are withdrawing have withdrawn from their emergency pot before.

Certified financial planner Paul Roelofse says the two-pot system may have a detrimental effect on future retirement savings.

“We are now interpreting the two-pot system as an access to money, and are deviating from the actual essence of retirement saving for the future,” he warns.

He adds that many people are just withdrawing from their fund to maintain a lifestyle that they cannot afford.

To listen to Paul Roelofse in conversation with John Perlman on 702’s Afternoon Drive show, click on the audio below: