South Africans warned about withdrawing savings amid pending two-pot system

With the two-pot pension system set to begin next month, retirement fund members are being urged to seek financial advice before tapping into their savings.

As of 1 September, retirement funds across the country will implement the two-pot system.

With the new reforms, members will now be able to withdraw a portion – up to a third – of their retirement savings before retirement, while still preserving funds.

“This system aims to support long-term retirement savings while providing flexibility to assist fund members in financial crises,” said Deputy Finance Minister David Masondo.

He was speaking at the Old Mutual Thought Leaders Forum where he cautioned fund members to ‘use savings sparingly and only when there is an urgent and dire need’.

“Seek trustworthy financial advice to consider the implications of withdrawing from the savings component.

“It is important to note that administration costs and tax at marginal rates will be deducted from such withdrawals.

“In addition, members will also lose out on all related future growth and the retirement benefit originally intended for those funds,” said Masondo.

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