The New Two Pot Retirement System

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There is a new retirement savings system going into action on 1 September 2024. No need to panic, the changes are actually quite simple. Let’s break it down: Say this potjie pot is your existing retirement fund. Every month you put money in, it gets invested and grows over time. You can access this pot when you retire.

Let’s put a lid on that existing pot and let it simmer for now. It is still going to grow, is safe and the same rules still apply to this pot when you leave your employer. Nothing will change. If you were a provident fund member over age 55 on 1 March 2021, you will receive further communication on your options.

So, from 1 September 2024 you will now haveanother 2 potjie pots, so the new system is actually 3 pots! Of your future contributions towards retirement funding, ⅓ will go into your savings pot and ⅔ will go into your new second retirement pot. You can also make a once off transfer of 10% of your existing pot into your savings pot (maximum R30 000) to get it going. As you add more contributions to these pots they will grow.

Now why is this system better? Well, you can cash in your savings pot once a year (minimum payment of R2 000) without having to resign. The savings pot allows you access to your savings for emergencies, but you will be taxed on these payments. There will also be payment costs and possible delays in payment due to increased claim volumes that you will have to consider. But, you should think very carefully about cashing in your savings pot because it is supposed to be for your retirement. It will also be taxed more heavily if you take it before then so you should really only use this money for education, medical or other financial emergencies.

But, you should think very carefully about cashing in your savings pot because it is supposed to be for your retirement. It will also be taxed more heavily if you take it before then so you should really only use this money for education, medical or other financial emergencies.

Now this part is important… You will not be allowed to touch your new second retirement pot until you retire, even if you leave your employer before then. It cannot be cashed in and the money in this pot must be saved for your retirement. So, keeping all your pots full until you retire will mean lower taxes, better cash and pension options and a better overall retirement for you.

Now this part is important… You will not be allowed to touch your new second retirement pot until you retire, even if you leave your employer before then. It cannot be cashed in and the money in this pot must be saved for your retirement. So, keeping all your pots full until you retire will mean lower taxes, better cash and pension options and a better overall retirement for you.

And remember, if you spend your savings pot before you retire, it will mean less saved for your retirement.

 

If you want more info on the new two pot retirement system, get in touch with your financial advisor.