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New Retirement System for South Africa signed into Law

04 Jun 2024
Author: Neil Helps

New Retirement System for South Africa signed into Law

President Cyril Ramaphosa has approved a new law called the Revenue Laws Amendment Bill of 2023. President Cyril Ramaphosa has approved a new law. The law is called the Revenue Laws Amendment Bill of 2023. This law allows people in retirement funds to access their savings. They can do so without quitting their jobs or withdrawing all their money at once.

The new law creates a retirement system with two parts. The system helps people save money before they retire. It also allows them to access funds if they are struggling financially.

The retirement system has two parts. The first part is for savings and retirement contributions made after September 1, 2024. The second part is for historical retirement benefits.

People can withdraw money from their savings account before they retire if necessary. The money in their retirement fund will remain untouched until they reach retirement age. This allows individuals to access funds for emergencies or other needs without jeopardizing their retirement savings.

The two-pot retirement system aims to help members access their savings during emergencies without leaving their job. This system consists of two separate accounts. One account is for retirement savings, while the other is for emergency funds. Members can withdraw from the emergency fund without affecting their retirement savings. This setup provides financial security and flexibility for individuals.

The new law aims to find a balance between long-term security and immediate needs, understanding that life can be unpredictable.

It permits fund members to access a portion of their savings during crises, such as those seen during the Covid-19 challenges.

Ramaphosa stated that the new retirement system will help protect and give dignity to South Africans facing financial struggles. The system aims to support individuals and households in need and reduce financial vulnerability in the country. This will be done as we work to improve the economy and provide more opportunities for South Africans. It aims to support individuals and households in need and reduce financial vulnerability in the country.

Old Mutual expresses its approval of the bill's signing, stating that it will yield substantial benefits in the long run.

“One of the most important points to communicate to members is when their money will be accessible. Even though the legislation goes live on 1 September, it doesn’t mean funds may be able to pay out on that date as there are several steps that need to be implemented first” the group said.

“This is primarily because the allocations to the Savings Pot can only happen from 1 September onwards”.

Starting September 1st, members will have a portion of their retirement fund allocated to their savings pot by August 31st, 2024. The allocated amount will be either 10% of their retirement fund value or R30,000, whichever is lower. This is part of the new system. From that point on, you must reserve two-thirds of any new savings for retirement and cannot access them until then.

Participants in Provident and Provident Preservation Funds who were aged 55 or above as of 1 March 2021 in the same fund, will be given the option to either adopt the new system or remain in the existing one.

Michelle Acton, Executive of Retirement Reform, clarified that disbursements from this emergency fund cannot be executed instantly.

You can only conduct seeding calculations after the end of August, using the values from that month. The law allows calculations to begin immediately after it is enacted. However, members may not have actual access until after September 1st. This information was provided by Acton.

Old Mutual said that Funds still have a lot of work to do to prepare for the new legislation.

This calculation determines the allocation of funds into various accounts. It takes into account the existing savings and the current value of investments in each member's retirement account.

This procedure may require multiple business days to weeks, based on the regulations established by each pension fund.

The Two-Pot system is meant for emergency savings. It gives you a boost to start saving for emergencies. But if you use it all up right away, it won't be there when you really need it.

Old Mutual said that signing the Pension Fund Amendment Bill and the Revenue Second Amendment Bill is important. The legislation cannot be fully implemented until these bills are signed.

SARS must finish the system requirements before making any savings pot payments. This is important because the tax deduction process must be smooth.

The group said members must have their taxes sorted before applying for a Savings Pot withdrawal. SARS may take out any unpaid taxes before giving the payment.

"Every member must possess a tax identification number to request a withdrawal from the Savings Pot."

Members will also have to invest time in comprehending this new system, and the significance of setting aside funds for retirement.

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