Two-Pot Retirement System Explained by Old Mutual Corporate

Jason 0 Comments April 2, 2024 Retire Wealthy Retirement Planning Tips for Retiree's

Old Mutual 0:00
Very few South Africans   reach the end of their working careers with 
enough money saved for their retirement. To help   retirement fund members preserve funds for their 
retirement, National Treasury has proposed a new   two-pot system for retirement funds. Your future 
retirement fund contributions will be allocated   to two components. One is a savings component, the 
other is a retirement component. For this example,   we'll use the pots to illustrate the concepts. 
When the two-pot reforms go into effect,   your retirement fund will value 
your existing retirement savings,   and will allocate this amount to its own pot, 
which the industry calls the vested component. The   current rules will still apply to your existing 
retirement savings. This money will be subject   to the existing rights of access and existing 
withdrawal tax tables. Then, 10% of this pot,   up to a maximum of R30,000 will be allocated 
to your savings pot and will be available for   you to withdraw. Going forward, 1/3 of your future 
retirement contributions will go into the savings   pot. This pot is designed to be your lump sum at 
retirement. However, in the case of an emergency,   you'll be able to withdraw the money from 
your savings pot once every tax year.

This   amount will be taxed to your marginal tax rate. 
Remember, any money withdrawn from your savings   component before retirement will reduce your lump 
sum at retirement. The minimum withdrawal amount   will be R2 000. The remaining two thirds of your 
future retirement contributions will be allocated   to the retirement pot. To preserve your savings, 
you won't be allowed to access this money until   you retire. At your retirement, you'll have to 
use it to buy a pension or annuity. The aim of   this is to provide you with an income during your 
retirement years.

There are a few important things   to note. The two-pot retirement system is to 
be implemented on the 1st of September 2024.   This will only affect your future retirement 
contributions from this date. If enacted,   the two-pot system will affect pension funds, 
provident funds, retirement annuity funds,   and preservation funds. Your existing retirement 
savings will be subject to the old rules, so   there's no need to panic. Provident fund members 
over 55 will have the option to stay and continue   contributing to all their retirement savings 
to their existing provident pot. The two-pot   system will give retirement fund members access 
to a portion of their savings in an emergency.   This savings component will also be available as 
a lump sum payment at retirement if you don't make   withdrawals. At the same time, the majority 
of your time and savings will be preserved to   provide you with an income during your retirement. 
If you have any questions about these proposals,   and how they might affect you or your retirement 
fund, please reach out to Old Mutual.

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