President Cyril Ramaphosa has signed into law the Revenue Laws Amendment Bill of 2023, which establishes a “two-pot” system that gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds.
The “two-pot” retirement system aims to address the concerns related to lack of preservation before retirement. Also lack of access to retirement funds by households in financial distress.
Savings and retirement component
This retirement system comprises a savings and retirement component for contributions made after September 1 2024. While historical retirement benefits will be housed in a vested component.
Individuals will have access to amounts in the savings component before retirement for times of financial distress. And the amounts in the retirement component are preserved until retirement.
The primary objective of the two-pot retirement system is to provide flexibility. This will enable fund members to access their retirement savings during emergencies. They will do this without necessitating resignation.
The reform introduced by the legislation strives to strike a balance between long-term security and immediate needs. It recognises life’s unpredictability.
Members to access portion of savings in a crisis
The law permits fund members to access a portion of their savings during crises. These are crises such as those seen during the Covid-19 challenges.
The changes ensure the retirement system remains responsive to diverse financial needs. It will support both long-term financial security and immediate assistance during emergencies.
Dignity and protection to those who need it
Traditional retirement systems primarily focus on long-term savings. They often lack the adaptability to address immediate financial crises.
President Ramaphosa said: “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.”
- Bua News
