WHAT IS A 2 POT RETIREMENT SYSTEM?

South Africa will see a major change in the retirement regime starting on the 1st of September 2024. It is a system which has come to be known as a two pot system, although it is actually a 3 pot system. This system comes into existence as a result of the intensive campaigning by the organized labour i.e Trade Unions mainly represented at the Nedlac platform. The major reason for this campaign which has ultimately resulted into the new retirement regime is to provide relief, financial relief to workers who are going through financial strain. The call to allow the workers to tap into their provident/pension funds started as far back as 2017, however, it intensified in 2020 during the Covid 19 Lockdown when the country came to a standstill and there was not much economic activity which meant a loss of earnings for the workers.

Workers in South Africa are confronted by serious financial difficulties with some having their houses and cars repossessed by the financial institutions due to the inability to keep up with the repayments. It therefore made sense to call for the legislation which will allow the workers access to a certain portion of their provident/pension funds so they can be able to payoff houses, cars and other financial commitments while still working. I mean it made no sense that someone with R500000 in their provident/pension fund would lose their house because they can nolonger pay off the remaining amount in their bonds, imagine losing your house because you are unable to pay off the remaining R50000 but you have R500000 in your provident/pension fund.

The new three pots regime will consist of the:

Pot 1: A vested pot which contains all your retirement savings before the 1st of September 2024.

All funds saved in your retirement plans before the implementation date will form part of the vested pot. The benefits as accrued up to that point will continue to apply along with old rules and legislation.

Pot 2: A savings pot that you may access once every year.

The savings pot will be funded by an initial lump sum from your vested pot, which will be up to 10% of your pot, but limited to R30000. This will be capped at R30000.From the implementation date, one third of your total annual contribution will go to your savings pot. The savings pot can be withdrawn, once every year, subject to a minimum amount of R2000.

Pot 3: A retirement pot that will not be accessible and will be preserved until retirement.

From the implementation date, two thirds of your total annual contribution will be allocated to your retirement pot, with compulsory preservation. You will not be able to access money in this pot when facing financial difficulties or changing jobs.

The tax laws do apply to any withdrawals made.

Sadly the R30000(maximum) is too little to address any of the financial problems faced by majority of workers. By the way majority of ordinary workers do not have enough in their provident/pension fund to qualify for the maximum amount of R30000 as the amount people are allowed to withdraw can only be 10% of what they have in their provident/pension fund.

By

Teboho Sekhosana

Political and Social Activists

sekhosanateboho9@gmail.com

0844361494