POINT OF VIEW: Silver lining in two-pot retirement system

Dieketseng Maleke is the Personal Finance content editor.

Dieketseng Maleke is the Personal Finance content editor.

Published Nov 4, 2023


Despite the mixed reactions regarding the proposed two-pot system, which would permit members of retirement schemes to access their pension funds before retirement, there might be a silver lining for hard-pressed South Africans as the National Treasury has set a definite date for the implementation of the system.

The implementation date of the two-pot retirement system had been changed to March 1, 2025, instead of 2024, said National Treasury DG Duncan Pieterse.

Pieterse was responding to a question I asked during a press briefing hosted by Finance Minister Enoch Godongwana before he tabled his Medium Term Budget Policy Statement.

I asked the question because the system was not mentioned in the MTBPS, which I thought was surprising.

This proposed system has been making headlines as there has been a lot of debate about it and some stakeholders said there were some things that needed clarification.

Last week, the National Treasury amended its original proposals on the two-pot retirement system and proposed that it be implemented in 2025.

Pieterse confirmed the date, and he said: “That is effective to give the industry and other stakeholders the time to get their systems in order following the promulgation of the legislation because there are various systems and changes that they may require.”

The proposed two-pot system intends to allow members of retirement schemes the flexibility to access a third of their savings before retirement while keeping the other two-thirds for retirement.

Before we (at least I) get excited, the final legislation has yet to be issued, and parliamentary approval is required before there is certainty that the system will be implemented.

I do think accessing my pension fund would come in handy as life and finances can sometimes be unpredictable, and I might need a large sum of money.

It should be the client’s prerogative how they use the money, and I think it would be wonderful for the government to pass this bill and allow people to have options.

What the National Treasury has also proposed is an increase in the amount that members can access when the two-pot system comes into effect, from an initial R25 000 to R30 000. The seed capital is about 10% of a member’s retirement savings value on February 28, 2025, up to a maximum of R30 000.

Momentum Corporate CEO Dumo Mbethe said: “During this extended time frame, it is our duty to ensure that the two-pot system is seen as a fire extinguisher for emergencies only and not a windfall to be used frivolously.”

Mbethe said the two-pot retirement system represented a fundamental shift in how retirement funds were managed, and it was essential that all stakeholders, especially members, were well-informed about the changes and how they may affect their retirement planning.

I agree with Mbethe on not spending the money foolishly, but having access to money that I have worked for would come in handy instead of taking out loans if I need about R30 000.

Regional executive at Sanlam Gert Bezuidenhout said the newly proposed two-pot retirement system presented opportunities and challenges in retirement planning.

“On one hand, having access to a separate savings pot offers a financial lifeline for those under financial stress, potentially preventing a deep descent into the debt trap. However, the same system could tempt individuals to make ill-advised withdrawals for non-essential expenses, such as a new car, thereby diminishing their retirement nest egg.”

He said that became especially significant as clients neared retirement age when that savings pot can provided a crucial lump sum to kick-start a well-planned retirement venture. Intermediaries must help clients understand the long-term impact that tapping into the savings would have on their retirement provisions.

“Every rand withdrawn today could translate into fewer months of financial security later. Sometimes, alternative solutions, such as taking a loan, might be more practical than compromising a client’s retirement savings,” Bezuidenhout said.

* Dieketseng Maleke is the Personal Finance content editor.