The National Treasury advised fund members to get reliable financial advice before making withdrawals from their pension savings.
Also read: SA’s new two-pot system: How it affects your retirement savings
The warning follows the presidential signing of the Pension Funds Amendment Act (31 of 2024) into law, marking the final step in introducing the two-pot system.
‘Fund members should also note that administration costs and tax at marginal rates will be deducted from such withdrawals. Members will lose out on all related future growth and the retirement benefit originally intended for those funds,’ National Treasury said on Tuesday.
Cape {town} Etc discount: Looking for things to do in the city, at half the price? Get exclusive offers here.
According to a government statement, the two-pot system is meant to improve the retirement outcomes for members at retirement by preserving a larger portion of the savings.
‘At the same time the reform allows some measured access in cases of financial distress without a member having to resign from employment,’ the National Treasury said.
‘The new two-pot retirement system creates a more sustainable retirement fund system while increasing flexibility to cater to the differing needs of members. The system will provide a welcomed relief mechanism for people in real crises to access emergency funds without resorting to loan sharks or having to quit their jobs to access their retirement savings while ensuring a larger portion of those savings [is] preserved until retirement.’
Retirement funds and trustees are currently updating their rules to match the new laws. Once ready, they will inform their fund members about the changes and provide details on the withdrawal process.
However, these updated rules first need to be approved by the Financial Sector Conduct Authority before they can be put into effect.
‘Most funds are set to implement the new split for contributions to the two new components (i.e. savings component and retirement component) on 1 September 2024, as planned.
‘They will also calculate the once-off seeding capital value using the vested component (i.e. retirement savings accumulated before [the] implementation date) on 31 August 2024, [which] will be available for transfer to the savings component and accessible to members from 1 September 2024.’
‘However, not all funds will likely be able to process withdrawal requests immediately on 1 September 2024, as the systems to do so and the mechanics to request such withdrawals will still be new or are being installed.’
‘Funds that are ready for such withdrawals will also need some time to process requests.’
Find your perfect set of wheels with these incredible deals on cars for under 100k. Find car listings here.
Also read:
President Cyril Ramaphosa signs two-pot retirement system into law
Picture: Towfiqu barbhuiya / Unsplash