President Cyril Ramaphosa has announced today that the Pension Funds Amendment Bill has been signed into law, making the two-pot retirement system now official.
The amendment resulted from ‘pressure from the trade union movement’, will allow fund members to withdraw a part of their pension fund savings before retirement, as reported by News24.
Also read: Ramaphosa enacts two-pot retirement system
Contributions will be divided into two pots, where one-third can be drawn on before retirement, while a second pot preserves two-thirds of savings and vests on retirement.
‘This dispensation gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds,’ the Presidency said in a press statement.
The two-pot system consists of the first pot, known as the savings pot, and the second, known as the retirement pot.
A member will be allowed to make a single withdrawal from the savings pot within a ‘year of assessment’ with the minimum withdrawal amount of R2 000, but withdrawals will be taxed at marginal tax rates.
Once a member has reached retirement age and subsequently retires, the ‘retirement component’ is to be paid in the form of an annuity, which will include a living annuity.
This annuity allows the reinvestment of retirement savings.
In addition, funds must establish the two pots by 1 September or before.
Also read:
Workers should be allowed to access a portion of their retirement funds, says Mboweni
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