{"id":781929,"date":"2024-07-11T09:23:48","date_gmt":"2024-07-11T07:23:48","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=781929"},"modified":"2024-07-11T09:23:53","modified_gmt":"2024-07-11T07:23:53","slug":"not-everyone-will-be-included-in-south-africas-new-retirement-system","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/781929\/not-everyone-will-be-included-in-south-africas-new-retirement-system\/","title":{"rendered":"Not everyone will be included in South Africa&#8217;s new retirement system"},"content":{"rendered":"\n<p>The new two-pot retirement system is less than two months away, but not every retirement fund member will be included. <\/p>\n\n\n\n<p>The new system will see one-third of all retirement savings from 1 September 2024 onwards go into a &#8220;savings&#8221; pot, which will be accessible before retirement.<\/p>\n\n\n\n<p>A second &#8220;retirement&#8221; pot will hold the remaining two-thirds of savings and only be accessible upon retirement. <\/p>\n\n\n\n<p>A third vested pot will hold all the retirement savings from before retirement and follow current legislation. <\/p>\n\n\n\n<p>&#8220;This new approach to retirement savings, effective 1 September 2024, is designed to strike a balance between long-term financial security and immediate financial needs,&#8221; said Alexforbes.<\/p>\n\n\n\n<p>&#8220;This marks a significant shift from the traditional savings model.&#8221; <\/p>\n\n\n\n<p>Although everyone is anticipating access to their retirement savings, Alexforbes said that it is important to note that the following exclusions apply:  <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Legacy retirement annuity funds<\/strong><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Beneficiary funds<\/strong><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Unclaimed benefit funds<\/strong><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Pensioners<\/strong><\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Members who were 55 years and older on 1 March 2021 who do not choose to opt into the two-pot retirement system between 1 September 2024 and 1 September 2025<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The new system is designed for emergencies, such as during the Covid-19 pandemic. <\/p>\n\n\n\n<p>Alexforbes said that the savings pot&nbsp;can if other options have been exhausted, be effectively used to assist people to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Get out of unsecured debt \u2013 short-term (personal or microloans)<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Save for children\u2019s education \u2013 long term, 18 years and more<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Access cash at retirement<\/li>\n<\/ul>\n\n\n\n<p>There are, however, greater risks for those who withdraw from the savings pot. <\/p>\n\n\n\n<p>New members who contribute 15% of their income to their retirement savings could see their replacement ratio (the percentage of an individual&#8217;s employment income that is replaced by retirement) rise to 75% if they don&#8217;t access the savings pot prior to retirement. <\/p>\n\n\n\n<p>For those who access the 100% annual withdrawal limit, this will drop to a 50% replacement ratio: <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001-1024x576.jpg\" alt=\"\" class=\"wp-image-781932\" srcset=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001-1024x576.jpg 1024w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001-300x169.jpg 300w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001-768x432.jpg 768w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/image001.jpg 1046w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Tax and withdrawal considerations <\/strong><\/p>\n\n\n\n<p>Alexforbes added that understanding the tax specifications set by SARS is also crucial, as these set the basis for applying tax for savings claims at marginal rates. <strong>Making a withdrawal can push an individual into a higher tax bracket.<\/strong><\/p>\n\n\n\n<p>Savings withdrawal benefits are taxed at marginal rates. <\/p>\n\n\n\n<p>Notably, these claims have no impact on the retirement tax table, meaning that it will not erode the R550,000 that can be taken tax-free upon retirement. <\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"table-responsive\"><table class=\"table\"><tbody><tr><td class=\"has-text-align-left\" data-align=\"left\"><strong>Event<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><strong>Vested pot<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><strong>Savings pot<\/strong><\/td><td class=\"has-text-align-left\" data-align=\"left\"><strong>Retirement pot<\/strong><\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Withdrawal before retirement<\/td><td class=\"has-text-align-left\" data-align=\"left\">Withdrawal tax table<\/td><td class=\"has-text-align-left\" data-align=\"left\">Marginal tax rate<\/td><td class=\"has-text-align-left\" data-align=\"left\">No cash lump sum can be taken<\/td><\/tr><tr><td class=\"has-text-align-left\" data-align=\"left\">Withdrawal at retirement<\/td><td class=\"has-text-align-left\" data-align=\"left\">Retirement tax table<\/td><td class=\"has-text-align-left\" data-align=\"left\">Retirement tax table<\/td><td class=\"has-text-align-left\" data-align=\"left\">No cash lump sum can be taken<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p class=\"has-medium-font-size\"><\/p>\n\n\n\n<p>Some individuals may also encounter special additional requirements before getting access to their savings pot: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Consent is required by a non-member spouse where divorce proceedings are underway<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Where the member has a pension-backed housing loan in place, a check needs to be undertaken to ensure that the member will have sufficient money to cover the loan following the withdrawal<\/li>\n<\/ul>\n\n\n\n<p>Several other problems that could result in the withdrawals being delayed include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The fund\u2019s make-up, which requires additional calculations (such as defined benefit funds)<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Tax issues (depending on an individual\u2019s circumstances)<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Additional requirements to mitigate fraudulent claims<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read<\/strong>: <a href=\"https:\/\/businesstech.co.za\/news\/banking\/781802\/the-one-big-advantage-south-africa-has-over-switzerland-capitec-ceo\/\">The one big advantage South Africa has over Switzerland: Capitec CEO<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>South Africa&#8217;s new two-pot retirement system will launch in September, with several tax considerations to keep in mind.  <\/p>\n","protected":false},"author":95,"featured_media":641707,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[16778,26],"class_list":["post-781929","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-alexforbes","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/781929","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=781929"}],"version-history":[{"count":10,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/781929\/revisions"}],"predecessor-version":[{"id":781996,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/781929\/revisions\/781996"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/641707"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=781929"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=781929"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=781929"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}