By Ahmed Areff.
President Cyril Ramaphosa has signed into law an amendment bill that establishes the two-pot system that allows members of retirement funds to access a portion of their savings.
“While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households, the new retirement system offers protection and dignity to those who need it the most to overcome financial stress,” Ramaphosa said in a statement on Saturday.
The presidency said the system, which is set out in the Revenue Laws Amendment Bill assented to by Ramaphosa, is aimed at preventing the total withdrawal of funds before retirement and the lack of access to money by those undergoing dire financial problems.
“The primary objective of the two-pot retirement system is to provide flexibility for fund members to access their retirement savings during emergencies, without necessitating resignation,” the presidency said.
“The reform introduced by the legislation strives to strike a balance between long-term security and immediate needs, recognising life’s unpredictability”.
In May, the Pension Fund Amendment Bill, which allows for the amendments of retirement rules for the two pot system, cleared all hurdles in Parliament, before being sent to Ramaphosa to sign as well. No announcement hace been made on this bill.
The implementation date for the two-pot system is 1 September this year.
With the introduction of the system, members’ retirement fund contributions will be divided into a savings component and a retirement component.
One-third of the contribution will be allocated to the savings component, while two-thirds will be allocated will be preserved until retirement. Retirement savings accumulated before the system’s implementation date will be put in a vested component and form part of the retirement component.
Members are allowed to withdraw from the savings component each year, with a minimum amount of R2 000 needed for members to be eligible for withdrawal. Members will be able to withdraw 10% of their retirement savings, or a maximum of R30 000, from their savings component.