President Cyril Ramaphosa has finally signed into law the Revenue Laws Amendment Bill of 2023 that establishes the two-pot system that allows members of retirement funds access to retirement savings, without having to resign or cash out entire pension funds.
The retirement system comprises a savings and retirement component for contributions made after 1 September 2024, while historical retirement benefits will be housed in a vested component.
Individuals will have access to amounts in the savings component before retirement for times of financial distress, and the amounts in the retirement component are preserved until retirement.
The primary objective of the two-pot retirement system is to provide flexibility for fund members to access their retirement savings during emergencies, without necessitating resignation.
“While we are continuing the task of growing our economy to create more opportunities for all South Africans and reduce the financial vulnerability affecting many individuals and households.
“The new retirement system offers protection and dignity to those who need it the most to overcome financial stress,” said Ramaphosa.
According to Ramaphosa, the reform introduced by the legislation strives to strike a balance between long-term security and immediate needs, recognising life’s unpredictability.
It permits fund members to access a portion of their savings during crises, such as those seen during the COVID-19 challenges.
“These changes ensure the retirement system remains responsive to diverse financial needs, supporting both long-term financial security and immediate assistance during emergencies. Traditional retirement systems primarily focus on long-term savings, often lacking the adaptability to address immediate financial crises,” added Ramaphosa.
