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TreasuryBL Premium reports that the Treasury’s proposals for a two-pot retirement system to cater for preservation and access to retirement funds in cases of financial need will also apply to retirement annuities and defined benefit funds.

This is according to a Treasury policy document on the proposal released on Tuesday for public consultation. The paper on retirement reform — “Encouraging South African households to save more for retirement” — proposes the previously announced “two-pot system” aimed at boosting household savings by increasing preservation before retirement while introducing more flexibility through partial access to retirement funds. Two-thirds of the fund would have to be preserved until retirement and one third could be withdrawn at any one time, thereby avoiding the need for workers to resign from their jobs to gain access to their retirement savings. With regard to retirement annuities (RA), Treasury said that if they were are not included in the two-pot system and no access was permitted before the age of 55, as was now the case, then there would be no way to assist individuals in financial distress who were probably self-employed. Including RAs in the two-pot system would mean that pension funds, provident funds and RAs will all be identical in terms of tax treatment, pre-retirement preservation and post-retirement preservation. The Treasury also proposed including all defined benefit funds, including the Government Employees Pension Fund, in the two-pot system since they were already required to value benefits before retirement and already make large preretirement payouts to employees who resigned or were retrenched.

  • Read the full original of the report in the above regard by Linda Ensor at BusinessLive (subscriber access only)

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