On 1 March 2024 there will be a radical change affecting everyone who is a member of a retirement fund, with the implementation of what has come to be known as the “two-pot retirement system”.
This change will apply to every member of an employer pension/provident fund, a retirement annuity, or a preservation fund – including members of the Government Employees Pension Fund (GEPF).
There have been many questions and complaints about how the new system will work, especially when it comes to withdrawals. In this podcast I put some of these questions to Basil Maseko, a Director of Tax and Financial Sector Policy at National Treasury.
Maseko points out that one of the reasons that National Treasury is implementing this new system is to create a system of “enforced savings” among South Africans.
In the podcast, Maseko also addresses the following points:
- Why government decided to implement this system now;
- What impact National Treasury expects this new system to have on retirement outcomes;
- How this new system will affect members of the Government Employees Pension Fund (since the GEPF is a defined-benefit fund), and whether the GEPF administrators will be ready for the new system in time;
- How National Treasury chose the 10% figure (up to a maximum of R30 000) that retirement fund members can transfer to their savings pot (and withdraw, if they so choose) on 1 March 2024; (*Note: the maximum figure was increased from R25 000 to R30 000 in late October 2023.)
- What discussions have been had with the retirement industry about issues surrounding liquidity, if millions of people choose to withdraw the maximum 10%/R30 000 from their retirement funds on 1 March 2024;
- Why and how withdrawals from the savings pot will be taxed;
- What will happen in the case of divorce or retrenchment.
Maseko concludes: “The key is that your retirement fund is for retirement, so as much as possible, let’s try and keep it that way!”
For more details on the two-pot retirement system, read this article.