The South African government has finalised and proposed new legislation that sets the laws for a ‘two-pot retirement system’ in SA. This system will reportedly allow South Africans to access one-third of their retirement sum while still working.
According to recent reports by eNCA, the new system will allow for a ‘savings pot’ which will contain one-third of retirement contributions that may be accessed before retiring. A second ‘pot’ consisting of the other two-thirds of contributions would then only be accessible upon retirement.
Additionally, a ‘vested pot’ will also be introduced to hold accumulated retirement savings before the new two-pot system is introduced. This ‘vested pot’ will be subject to the rules of the member’s current respective fund.
The idea for the new two-pot system was reportedly sparked during the Covid-19 epidemic, when thousands of SA citizens found themselves in desperate need of financial relief due to the widespread impact of the epidemic.
According to an article published by BusinessTech, the National Treasury anticipates that the necessary legislation for the new two-pot system will come into effect on 1 March 2024.
In reports released by Sanlam, tax implications and further details regarding retirement annuities, retrenchment, divorce, benefit funds have still not been defined. Additionally, withdrawals from the savings will be set to once annually, but there have been no indications of how the year will be calculated.
Members of public have until 15 July 2023 to comment before the bill becomes law.
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