Enslins | Understanding the Two-Pot System
Starting 1 September 2024, the two-pot retirement system will split your contributions into two parts: a Retirement Component (two-thirds) for future retirement income, and a Savings Component (one-third) for annual access in emergencies. Understand what this means for you and your retirement plans.
As a member of a retirement fund, it’s crucial to stay informed about changes that could affect your retirement savings. Starting on 1 September 2024, the new two-pot retirement system will come into effect, bringing some changes that you need to be aware of. However, there’s no immediate action required from you, and this new system is designed to enhance how your retirement savings are managed without impacting your long-term goals.
WHAT DOES THE TWO-POT SYSTEM MEAN FOR YOU?
Under the new system, all retirement contributions from 1 September 2024 will be divided into two distinct components:
Retirement Component (Two-thirds): This portion will be dedicated to your retirement fund and will remain inaccessible until you retire. At retirement, you will need to use this amount to purchase a retirement income product.
Savings Component (One-third): This portion will be available for you to access once per tax year. It’s intended to provide liquidity in case of severe financial stress, but it’s important to use it judiciously as accessing this fund could significantly impact your retirement savings.
WHAT HAPPENS ON 1 SEPTEMBER 2024?
On this date, existing assets in your retirement account will be split, and a one-time transfer of up to R30 000 (10% of the market value of your retirement account as of 31 August 2024) will be moved from your vested component to your savings component. This process is known as seeding.
ACCESSING YOUR SAVINGS COMPONENT
You should consider withdrawing from your savings component only as a last resort. Frequent withdrawals could reduce your retirement savings significantly. If you’re contemplating a withdrawal, it’s advisable to consult with your independent financial advisor to understand the impact on your long-term retirement planning.
You can make one withdrawal of at least R2 000 per tax year from your savings component.
Withdrawals are taxed at your marginal tax rate, and you’ll receive the amount after tax has been deducted, less any amounts owing to SARS.
There are no penalties for not withdrawing, and the amount in your savings component will continue to grow and be available for future withdrawals.
HOW ENSLINS CAN HELP
Navigating these changes and understanding how they affect your retirement planning can be complex. That’s where Enslins comes in. Our team of experienced financial advisors is here to guide you through the new two-pot system and help you make informed decisions about your retirement savings. Whether you need advice or have any questions, Enslins is here to support you every step of the way.
For personalised assistance and to ensure that your retirement planning aligns with these new regulations, contact Enslins today. Let us help you secure your financial future with confidence.
