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Maroela Media reports that Solidarity has expressed a serious warning about the so-called two-pot system in terms of which annual withdrawals from an individual’s retirement money will be possible from 1 September 2024.
Solidarity Deputy General for Strategy, Marius Croucamp, warned that although the system aimed to give employees access to funds for emergencies, it certainly entailed risks. “The main risk is that on the day of retirement there will be much less retirement money available to an individual who has withdrawn funds from his or her savings pot. They will then probably have to get additional income from somewhere to be able to take care of themselves in their old age.” He went on to say: “There will be a huge temptation to withdraw money with ease from the savings pot because it will be possible to do so annually. It must also be borne in mind that the money that has been withdrawn will be taxed at an individual’s marginal tax rate because it is considered as income. This could subsequently place the person in a higher tax bracket.” In cases where home loans have been granted by funds, he cautioned the funds to make sure there was enough money to cover the particular loan or guarantee before payouts were considered from the savings pot. “Retirement funds must also amend their fund rules to comply with the requirements of the two-pot system. As there are hundreds of retirement funds in South Africa, the authorities will have their job cut out to approve all the amendments by 1 September 2024,” Croucamp pointed out.
- Read the full original of the above report in Afrikaans at Maroela Media
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