The Two-Pot Retirement System Explained

 On 1 September 2024, South Africa officially implemented the #twopotsystem, designed to give individuals more flexibility with their #retirementsavings in case of financial hardship while ensuring they have enough resources for a secure retirement. Let’s go over some key information… 💡

Q: Who qualifies for the Two-Pot System? 

The two-pot retirement system is available to anyone who contributes to a pension or provident fund in South Africa, which includes employees who are members of employer-sponsored funds or individuals with retirement annuities. Existing members of funds do not have to re-enrol to access the new system.

Q: How does the Savings Pot work? 

As of 1 September 2024, 10% of your current retirement savings has moved as seeding money into the new Savings Pot. Going forward, the Savings Pot will hold 1/3 of your retirement contributions and can be accessed before you retire. You can withdraw funds from this pot once per tax year to cover financial emergencies or needs (minimum withdrawal of R2000). This withdrawal will be taxed at the normal existing rate.

Q: How does the Retirement Pot work? 

The remaining 2/3 of your retirement contributions will be locked in until you retire. This ensures that the bulk of your retirement savings remains protected for your future. Existing retirement savings before 1 September 2024 will not be affected. Only contributions after the pot system starts will be split into two pots.

Q: What should I know about the Two-Pot System? 

It’s important to understand the implications of the two-pot retirement system and if you access some of your retirement savings early. You should only access your retirement savings as a last resort if facing financial hardship. Your contributions will grow steadily over time to provide a secure and financially healthy foundation when you need it most.

 Remember to consult a financial advisor to assess how this system affects your retirement journey so you know what your personal strategy may be!

Contact info@leapsa.co.za for more guidance.