“While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households, the new retirement system offers protection and dignity to those who need it the most to overcome financial stress,” said President Cyril Ramaphosa.
A two-pot retirement system has been introduced through the enactment of the Revenue Laws Amendment bill of 2023 which was signed on Saturday the first of June. The amendment law address issues related to lack of preservation before retirement and lack of access to retirement funds by households in financial distress.
The two-pot system allows members of retirement funds access to retirement savings without having to resign or cash out entire pension funds. The system has a savings component and a retirement component for contributions made after 1 September 2024. Individuals will have access to the funds in the savings component for financial emergencies, before their retirement. The retirement component will be kept up until retirement.
The main objective of the this two-pot retirement system is to enhance flexibility when it comes to the accessibility of funds before retirement. In other words, members of the retirement fund do not need to resign for them to gain access to their funds.
This supports responsiveness of the retirement fund scheme to different financial needs, supporting both long-term financial security and immediate assistance during emergencies. Traditional retirement systems primarily focus on long-term savings, often lacking the adaptability to address immediate financial crises.
Retirement funds have until 15 July to submit their rule amendments for registration so that new fund rules can be registered and approved before 1 September. Delay in doing so will delay the implementation of two-pot reforms and paying out savings withdrawal claims.