South Africa is eight weeks away from the most significant retirement reform in the country's history when the two-pot retirement system takes effect.
Under the two-pot retirement system, a member's contributions to a fund are split into a savings component that is accessible once in a tax year, and a retirement component.
For existing retirement fund members, there is also a third component the vested component containing the fund member's contributions up to 31 August.
The savings component will be initially seeded with the lower of 10% of the value of the retirement fund or R30 000 as at 31 August.
From there on, two thirds of any new retirement savings will be preserved in the retirement component, which can only be accessed once a member reaches retirement age.
Many South Africans have been eagerly waiting to access to a portion of their retirement money in the savings pot. But fund administrators point out that there are crucial things to bear in mind.
No immediate payouts
"One of the most important points to communicate is when their money will be accessible," said Michelle Acton, retirement reform executive at Old Mutual.
Acton heads up Old Mutual's two-pot reform across all its retail and employee retirement funds and has been involved in the planning and implementation from the word go.
"Even though the legislation goes live on 1 September, it doesn't mean funds may be able to pay out on that date as there are several steps to be implemented first. Fund administrators can only start doing the seeding calculations (for the savings pot) from 1 September onward."
The seeding calculation determines the initial amounts assigned to different components based on existing retirement savings. The amounts that will be allocated depend on the current amount of savings in each member's retirement account and their market value.
This story is from the July 13, 2024 edition of The Citizen.
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This story is from the July 13, 2024 edition of The Citizen.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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