Concerns over security risks of Two-Pot Retirement system

With just days until the Two-Pot Retirement system comes into effect, concerns have been raised about potential security risks. Especially when it comes to accessing pension funds.

Murray Collyer, the Chief Operating Officer of iiDENTiFii*, says there are a number of vulnerabilities that could arise, due to inadequate security measures currently in place.

The two-pot system, which will be implemented on 1 September 2024, allows individuals to withdraw a portion of their pension savings before retirement. Collyer warns that this comes at a time when phishing, vishing (voice phishing), and social engineering scams have become increasingly sophisticated.

“Unfortunately, today, they are still using traditional methods of protection, such as PINs, passwords, and cell phone numbers. And those are currently woefully inadequate.”

Collyer’s primary concern is that the outdated security measures could be easily exploited by fraudsters.

“The risk is that someone will gain access to your pension fund profile, change a few parameters on it, and withdraw funds on your behalf that were earmarked for your retirement. That is something that no South African can afford.”

To mitigate these risks, Collyer advocates for the use of biometric solutions to secure personal information and transactions. He emphasises the simplicity of integrating biometric verification into existing systems.

“What consumers need to start requesting is that they use their biometric identity to validate and authenticate any requests coming to an administrator. This can be done as simply as a company like iiDENTiFii sending out an SMS to you that triggers a remote authentication.”

Collyer urges individuals to become more vigilant about their pension fund security.

“You are taught throughout your entire life to save, put it in a pension, and don’t look at it. The inverse is now actually true.”

He advises people to regularly check their pension fund statements and reset passwords. This is to ensure that any information that may have been compromised is no longer valid.

Be Two-Pot Tax Savvy!

Before you apply to your retirement fund, check the following:

🔹 Are you registered for tax?
🔹 Do you have any outstanding returns?
🔹 Do you have any tax debt?

More information: https://t.co/lAPDkUYgDN #YourTaxMatters #TwoPotTaxSavvy pic.twitter.com/3XDxCGMZKc

— SA Revenue Service (@sarstax) August 27, 2024

Tax implications of withdrawals

The South African Revenue Service (SARS) says persons intending to withdraw from the savings pot must be registered for tax. Adding that any withdrawals will be subject to tax deductions based on the individual’s applicable tax rate.

Additionally, SARS will deduct any outstanding debts owed to the agency before the payout is made.

A tax calculator is available on the SARS website to help pension fund members estimate the amount they can expect to receive after tax deductions.

Taxpayers are urged to take the necessary precautions to protect their assets and ensure compliance with the new regulations.

“It really comes down to the individual now being aware, being very mindful of any strange SMSs, emails, and the like that comes to them and to act very cautiously when it comes to this,” said Collyner.

*iiDENTiFii is a provider of enterprise-grade identity verification solutions