{"id":790349,"date":"2024-09-14T11:00:00","date_gmt":"2024-09-14T09:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=790349"},"modified":"2024-09-14T10:02:40","modified_gmt":"2024-09-14T08:02:40","slug":"what-to-do-with-your-two-pot-payday-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/790349\/what-to-do-with-your-two-pot-payday-in-south-africa\/","title":{"rendered":"What to do with your two-pot payday in South Africa"},"content":{"rendered":"\n<p>South Africa&#8217;s two-pot system is live, but consumers who withdraw from their retirement savings should use that money to pay off debt.<\/p>\n\n\n\n<p>The two-pot system transfers one-third of all retirement savings from 1 September 2024 into a &#8220;savings pot,&#8221; which is accessible before retirement.<\/p>\n\n\n\n<p>A &#8220;retirement pot&#8221; will hold the remaining two-thirds of savings and only be accessible upon retirement.<\/p>\n\n\n\n<p>A third &#8220;vested pot&#8221; holds all the retirement savings until the implementation date, except for R30,000 used as seed capital in the savings pot, and follows prior legislation.<\/p>\n\n\n\n<p>Many financial institutions have warned that withdrawing can impact one&#8217;s retirement savings, as one loses the benefit of compound interest.<\/p>\n\n\n\n<p>There are also tax hits for those who withdraw early. <\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-businesstech wp-block-embed-businesstech\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"9lp6ucsrYa\"><a href=\"https:\/\/businesstech.co.za\/news\/finance\/790136\/massive-two-pot-payday-for-sars\/\">Massive two-pot payday for SARS<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Massive two-pot payday for SARS&#8221; &#8212; BusinessTech\" src=\"https:\/\/businesstech.co.za\/news\/finance\/790136\/massive-two-pot-payday-for-sars\/embed\/#?secret=LUqgISrzwl#?secret=9lp6ucsrYa\" data-secret=\"9lp6ucsrYa\" width=\"500\" height=\"282\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>That said, it is recommended that those who do withdraw from their savings control their debt.<\/p>\n\n\n\n<p>The latest GDP data from Stats SA showed that the economy grew by a modest 0.4% in Q2 2024, with improvements in the finance, trade, and manufacturing industries. <\/p>\n\n\n\n<p>Household consumption also saw a significant rise, indicating consumer confidence. <\/p>\n\n\n\n<p>Inflation dropped to 4.6% in July &#8211; the lowest level in three years.<\/p>\n\n\n\n<p>The lower inflation print means many believe the South African Reserve Bank will reduce interest rates in September. <\/p>\n\n\n\n<p>\u201cThe economic indicators are promising, but they come with a strong call to action for those struggling with debt,\u201d said Sebastien Alexanderson, Head of National Debt Advisors (NDA).<\/p>\n\n\n\n<p>\u201cWith inflation on a downward trend and the economy showing signs of improvement, now is the time to leverage these conditions to manage and reduce your debt.\u201d<\/p>\n\n\n\n<p>The new system has already seen many South Africans withdraw from the savings pot. <\/p>\n\n\n\n<p>\u201cMany are seeing this as a way to ease their financial strain,\u201d said Alexanderson. <\/p>\n\n\n\n<p>\u201cHowever, it\u2019s critical to use these funds wisely, especially when it comes to addressing existing debt. While the temptation might be there to spend on non-essential items, paying off debt can provide long-term financial relief.\u201d<\/p>\n\n\n\n<p>He added that paying off debt, particaurly high-interest debt like credit cards and personal loans, should be the priority for those who withdraw. <\/p>\n\n\n\n<p>South Africans continue to struggle with levels of personal debt.<\/p>\n\n\n\n<p>Although the National Debt Advisors reported a slight decline (3.3%) in consumers seeking debt help over the last year,  total outstanding debt exceeded R1.47 billion (7.5% increase). <\/p>\n\n\n\n<p>Consumers, on average, had four unsecured debts, one credit card and one store account. <\/p>\n\n\n\n<p>\u201cThe figures we\u2019re seeing are concerning,\u201d said Alexanderson. <\/p>\n\n\n\n<p>\u201cWhile fewer consumers signed up for debt review compared to the previous year, the total outstanding debt has increased, meaning people are carrying more debt than before, yet fewer are seeking help. This is why it\u2019s so important to take steps now to address these issues before they worsen.\u201d<\/p>\n\n\n\n<p>With the introduction of the two-pot system and the improvement in the economy, Alexanderson said that South Africans now have a unique opportunity to regain financial stability.<\/p>\n\n\n\n<p>\u201cAccessing a portion of your retirement savings should be done cautiously, but if you\u2019re using these funds to pay down debt, you\u2019re ultimately investing in your future.&#8221;<\/p>\n\n\n\n<p>&#8220;Clearing your debt not only improves your credit score but also reduces financial stress and sets you up for better financial security in retirement,\u201d said Alexanderson.&#8221; <\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/media\/790277\/dstv-and-supersport-abusers-nailed-in-south-africa-with-more-to-come\/\">DStv and SuperSport abusers nailed in South Africa \u2013 with more to come<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new two-pot retirement system is live in South Africa, and those accessing their retirement funds should exercise caution.<\/p>\n","protected":false},"author":95,"featured_media":781227,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,8792],"class_list":["post-790349","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-nada"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/790349","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=790349"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/790349\/revisions"}],"predecessor-version":[{"id":791111,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/790349\/revisions\/791111"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/781227"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=790349"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=790349"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=790349"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}