President Cyril Ramaphosa has signed into law an amendment bill that establishes the two-pot system, allowing members of retirement funds to access a portion of their savings.
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‘While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households, the new retirement system offers protection and dignity to those who need it the most to overcome financial stress,’ said Ramaphosa in a statement on Saturday.
The presidency explained that the system, outlined in the Revenue Laws Amendment Bill, aims to prevent total fund withdrawal before retirement and provide access to funds for those facing financial hardships.
‘The primary objective of the two-pot retirement system is to provide flexibility for fund members to access their retirement savings during emergencies, without necessitating resignation,’ the presidency stated.
In May, the Pension Fund Amendment Bill, facilitating the two-pot system, cleared all parliamentary hurdles before reaching Ramaphosa for signature. No announcement has been made regarding this bill.
The implementation of the two-pot system is set for 1 September this year. Under this system, retirement fund contributions will be divided into a savings component and a retirement component.
One-third of the contribution will be allocated to the savings component, while two-thirds will be preserved until retirement. Pre-existing retirement savings will form part of the retirement component.
Members can annually withdraw from the savings component, with a minimum of R2 000 required for eligibility. The maximum withdrawal is set at 10% of retirement savings or R30 000 from the savings component.
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