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‘Two-pot retirement system a double-edged sword’

todayMarch 1, 2024 69

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CEO of Inkunzi Wealth Group, Owen Nkomo, has advised young people to seek advice should they consider tapping into their retirement savings earlier.

South Africans will, from the beginning of September, be able to get a portion of money from their savings due to the upcoming two-pot retirement system.

The system seeks to assist workers who might be in need of urgent financial assistance,  among others.

However, Nkomo, who is a markets and investment expert, says he is concerned that young people will be withdrawing more from these savings as compared to the older generation.

He’s advised people to rather leave the money to grow as withdrawing it can set them back.

According the system, one-third of all retirement contributions will be allocated to the “savings component”, and members will be able to make a withdrawal of up to 100% that has accumulated in that component prior to retirement.

There is also the “retirement component” which will be inaccessible before the member retires and will consist of two-thirds of all retirement contributions plus investment growth.

A minimum withdrawal of R2 000 will apply, and each member will be limited to one withdrawal per tax year.

 

Nkomo says people need to get look at getting advice on whether this is recommended for them and if it is feasible.

Government hopes to raise an additional R5 billion in this tax year from taxpayers who make use of the once-off withdrawals from their retirement savings.

Nkomo says he hopes that the young people will continue to invest, adding that he an age limit to the system would help curb unnecessary withdrawals.

The system was initially meant to come into effect from this month, but was pushed back following calls from the pension industry, who wanted more time to make the necessary changes for a smooth transition.

Written by: Nonhlanhla Harris

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