It is the hot topic on everyone’s lips; the Pension Funds Amendment Bill which will enable the recently legislated two-pot retirement system to be implemented. On Sunday, President Cyril Ramaphosa signed the bill into law.
The change to the country’s retirement system means that workers will be able to access 1 third of their pension funds, while the rest will remain inaccessible and preserved until retirement. The seed capital will be limited to 10% of the amount in your retirement fund account, subject to a maximum amount of R30,000. To access a withdrawal benefit of R30 000, the value of your retirement fund account on 31 August 2024 needs to be a minimum of R300 000.
Pension Funds Bill: Two-pot retirement system official
The new system will take effect on 1 September 2024. Chief economist Dawie Roodt has cautioned people against touching their money:
PROS VS CONS
“Please don’t go and withdraw this, especially if you want to withdraw and take a holiday. I am in the front management business and I can tell you very, very few people can retire and be financially independent, simply because they have not saved enough money for retirement. What I am very concerned about is that many people are going to withdraw this money. Remember if you withdraw this money or the money that you can get access to, and then you have to pay a lot of tax on that as well,” elaborated Roodt.
Furthermore, he says the only advantage is that the new system will prevent premature resignations. Many people opt to resign to access their money, leaving them jobless and with less cash left for old age.
“Perhaps it is not such a bad idea, because quite often people resign to get access to their money. Now, some people will not (have to) resign,” concluded Roodt.
