By Fiona Wakelin
From 1 September 2024 retirement fund members will be able to make partial withdrawals from their retirement funds before retirement, while preserving a portion that can only be accessed at retirement. The purpose of this is to offer flexibility to those fund members experiencing tough financial times, while at the same time supporting long-term retirement
In many cases, retirement funds. Under the current system members are resigning from their funds to access savings to pay off debt – which is a short term solution and does not bode well for retirement.
This new two-pot system has been conceptualised and designed so that those fund members who are experiencing hard times financially will have access to a portion of the savings component before retirement. A “divine and” instead of an “either or” approach.
The new system will apply to all private sector and public sector retirement funds, except for the old generation legacy retirement annuity policies, or funds with no active participating members. Pensioners and members of provident funds who were 55 years
and older on 1 March 2021 who have not opted to be part of the two-pot system will also be excluded.
The following shows how this system will actually work in practical terms. Importantly the reform will create 3 components:
After September 1, only the savings and retirement components will receive retirement contributions while the vested component will contain those retirement benefits accumulated by the member prior to implementation date - which will continue to accumulate investment growth.