The system divides retirement contributions into two pots: a retirement pot and a savings pot.
While it offers greater flexibility, it also presents significant downsides for investors who are not careful about accessing their savings.
The retirement pot is designed to be a long-term savings vehicle for purchasing an income in retirement.
From 1 September, two-thirds of one's monthly retirement contributions started going towards this pot and it started being accessed from the same date.
An initial seeding amount (the lower of 10% or R30 000) plus one-third of monthly contributions now make up the value of one's savings pot.
Withdrawing from the savings pot before retirement will have significant consequences for long-term financial security.
The dangers
One of the primary dangers of accessing the savings pot before retirement is the erosion of savings. Early withdrawals reduce the overall value of retirement savings, which will significantly affect future retirement income.
Esta historia es de la edición December 07, 2024 de The Citizen.
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