Pros and cons of two-pot retirement system

 

Financial experts says even though the two-pot system could be beneficial, South Africans must be aware of the pros and cons of withdrawing early.

President Cyril Ramaphosa on Sunday signed the Pension Fund Amendment Bill into law, which will come into effect on the 1st of September.

The amended piece of legislation will allow workers to tap into their pension funds at least once a year, without having to resign or cash out their funds, completely.

The money will be split into the vested and the savings pot.

Two-thirds of funds will go to the retirement pot, while one-third (33.33%) goes to the savings pot, where fund members can make one withdrawal per year capped at R30 000.

This portion would be accessible to members before they reach retirement age.

Speaking to YNews, Investment Product Specialist at Liberty, Nosipho Nhleko, says the benefits to this system include having the flexibility to access one’s retirement savings.

Nhleko advises Yires to view the two-pot system as money available for emergencies only.

Economist Dawie Roodt, also speaking to YNews, advised South Africans to rather invest more in their pension funds instead of withdrawing money.

Labour federation, Saftu, isn’t entirely happy about the upcoming luxury of withdrawing a portion of one’s pension money.

It wants the system revised to allow workers to have the choice to withdraw their full retirement money, not just a portion.

The union’s Trevor Shaku says that move would provide a much-needed relief for cash-strapped workers.

The country’s largest labour federation and ANC ally, Cosatu, is happy with the two-pot retirement system in its current form.

Cosatu’s Matthew Parks says it will assist South Africans who are drowning in debt and battling to cope with the rising costs of living.

South Africans are also divided on it.

While some believe the partial withdrawals will help them, others say it’s a trap.

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— KN (@_ABEL_Rosnovski) July 23, 2024

Government’s parasitic fund-raising system called Two Pots Retirement System is nothing but ‘grand looting’ of highest proportions because of Tax to be imposed on Retirement funds when withdrawing ( I mean, ranging between 18 and 45 % ) that’s theft. pic.twitter.com/QsAEPnolGu

— Khulani Nene-Buthelezi. (@khulani_1972) July 23, 2024

I have three employees that have not recieved their pension payout after retirement in February and March 2024. Technical system glitches. Tgt two pot nonsense is going be the death of our people.

— Olothando (@Olothando7) July 22, 2024

Take time to understand the two pot system, mate. In the long run, this system is going to promote the preservation of retirement fund investments until members retire. Gone are the days when people would resign in order tap into all their pension fund savings.

— 🇿🇦 (@MMakhos) July 21, 2024

Am I the only person who sees the benefit to the two pot retirement system ?

— Fatsjb17 (@fatsjb17) July 21, 2024

The government’s two pot retirement system, which comes into effect on the 1st of September, will almost certainly trigger a tax windfall for the gov as people race to liquidate savings. Is there any other expectation in this economy? @GovernmentZA @sars @StatsSA @fscasouthafrica

— Paulo Sérgio Martins (@PauloSergioMDC) July 18, 2024

Listening to a Two Pot Retirement System webinar and a very important point being made. Most administrators will charge a fee for withdrawals from savings pot. This is to cover the higher admin costs of managing these withdrawals

— maya fisher-french (@mayaonmoney) July 16, 2024