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Old Mutual Personal Finance head of advice Lizl Budhram said the new two-pot retirement system that South Africa plans to adopt in March 2024 could provide good opportunities for investors to maximise their returns but comes with considerable risk.<\/p>\n
Parliament\u2019s Standing Committee on Finance recently agreed to introduce the two-pot pension system from\u00a01 March 2024.<\/p>\n
This new system will allow individuals to contribute one-third of their savings into an account that can be accessible at any time, while two-thirds must only become available at retirement.<\/p>\n
PPS Investments\u2019 institutional client specialist, Nkululeko Kunene, said the proposed two-pot retirement system that is set to be implemented in 2024 should be seen as a golden opportunity to bolster retirement savings.<\/p>\n
However, Budhram explained that once someone reaches retirement, there is an amount in their fund that they can withdraw as a lump sum.<\/p>\n
\u201cWhen we deal with clients who reach retirement, it\u2019s usually very important to have access to that lump sum because often people then still have a bond or they still have debt that they would like to repay before they commence into their retirement years,\u201d she said.<\/p>\n
However, \u201cat the moment, we see if you withdraw money, there\u2019s a table at which the withdrawal amount will be taxed that does penalise you at retirement\u201d.<\/p>\n
Under the new system, the full withdrawal amount will be subject to a person\u2019s marginal tax rate, which is the highest tax rate that applies to a portion \u2013 but not the entirety \u2013 of a person\u2019s income, and there are no exempt amounts under the two-pot system.<\/p>\n
\u201cSo, the tax implications can be really negative. It\u2019s really important to understand that well before you finalise your decision to withdraw from your pension fund,\u201d Budhram warned.<\/p>\n
She added that the speed at which this system \u2013 which was originally planned for 2025 \u2013 is being implemented is a significant concern.<\/p>\n
\u201cA lot of work needs to happen to make sure everything is ready because we want to make sure that the right people can access their funds,\u201d she explained.<\/p>\n
\u201cThere will be tax calculations so people can make informed decisions. So, making sure that everything is ready and the system will work well is definitely a stress factor because we don\u2019t have a lot of time with the current date.\u201d<\/p>\n
Old Mutual Personal Finance head of advice Lizl Budhram said the new two-pot retirement system that South Africa plans to adopt in March 2024 could…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1578","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1578","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1578"}],"version-history":[{"count":2,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1578\/revisions"}],"predecessor-version":[{"id":1581,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1578\/revisions\/1581"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1578"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1578"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1578"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}