Two-pot retirement system starts in September

Government expects to raise an additional R5 billion in the 2024 tax year from taxpayers who make use of the once-off withdrawals from their retirement savings.

Finance Minister Enoch Godongwana has adhered to the public voice to hasten the process whereby people can access a portion of their retirement savings, despite requests from pension fund administrators to delay it to next year.

He announced that the implementation date of the twopot retirement system will be 1 September this year. Contributions to retirement funds will be split, with one-third going into a “savings component” and twothirds going into a “retirement component”.

Industry players have requested 1 March next year as the implementation date, given the complexity of making the necessary changes to their systems to be able to implement the new system as smoothly as possible.

Jenny Klein, principal associate at ENSafrica, said there have been two competing objectives. People have a desperate need to access their retirement savings, in particular, because of the Covid pandemic. “On the other hand, industry wanted to have sufficient time to implement these extensive changes.

“It is important to get it done correctly to avoid chaos when millions of members want to withdraw,” she said.

Retirement fund members will be able to withdraw amounts from the savings component before retirement, while the retirement component will remain protected.

National Treasury explained in the budget review that savings accumulated up to 1 September will not be affected. A seed capital amount of the lower of 10% of the fund value on 31 August this year, or R30 000 will be transferred from accumulated retirement savings to the savings component.

Fund members will be able to immediately withdraw from the savings component if they have a financial emergency. “This will be a once-off event. If not used, it will still be available in the future,” treasury explained.

Taxpayers are forewarned that pre-retirement withdrawals from the savings pot will be taxed at marginal rates, like all other income. Only one withdrawal may take place in a tax year, and the minimum withdrawal amount is R2 000.