Page 28 - FWG Issue 7 August 2024

Finance

THE NEW TWO-POT SYSTEM:

AN OPPORTUNITY TO CHECK IN AND STEP UP

B Y LEANI LE ROUX

rying to run a house, shoot the employees around balancing short- savings withdrawal, and, critically, ‘make up’
lights out at work and keep the term cashflow needs and longer-term the amount you’re taking away from your
lights (and water) on at home? retirement planning. According to National retirement pot.’
TAdulting in the northern suburbs Treasury, more than 60% of retirement fund
is not for the faint hearted. But there’s members had accumulated pension pots of The assumption is that only low-income
something else that’s crying out for our less than R50,000 in 2020. And the average earners will be accessing their Savings Pot,
attention and the reality is that it’s much fund member resets their retirement however, a similar rollout in Australia, Brazil
needed - 96% of South Africans will work savings balance to zero every eight years. and Chile showed 90% of all fund members
their whole lives and not be able to afford used their right of withdrawal. Further
to retire. It is hoped that by giving fund members research conducted by Worth showed
access to a portion of their retirement funds, that of the people intending to make a
This dire statistic is one of the reasons for their ‘Savings Pot’, that this distressing trend withdrawal in September, 51% needed to
government implementing the new “Two- will be reversed. use that money to repay debt or loans and
Pot” retirement system, which goes live on 43% want to use it to cover their increasing
September 1st. And the bit that’s got most ‘What used to happen is that when cost of living.
people’s attention is that they can access employees changed jobs, they’d get
R30,000 from their retirement funds once access to their entire retirement fund, and This is where employers can make a deep
this new legislation kicks in. withdraw it,’ says Gary Kayle, CEO of Worth. and lasting impact through financial
education. ‘Firstly, there are other ways to
‘HR departments are going to be at the front This change is meeting the reality of decrease debt and cover increasing cost
line when it comes to employees wanting South African’s economic needs with of living expenses and we’re experienced
to know where, when and how they can the traditional retirement management at creating this financial behavioural
access this money – and critically, whether landscape, according to Gerald change,’ says Parry. ‘Secondly, no one is
they even have the funds to withdraw in Mwandiambira, Certified Financial Planner getting R30,000 into their bank account in
the first place,’ says Hayley Parry, co-founder and author. The access to some (rather than September as there are significant tax and
of Worth Financial Education. all) of your money is a great step towards fee implications for every withdrawal. For
taking real responsibility for your financial example, if you’re in the top tax bracket,
It’s creating a sense of urgency for future, he says. ‘But you need to have a plan you’ll be lucky to bank R16,500 after that’s
employers to proactively inform their around how you’re going to approach your taken into account,’ she adds.

Fourways Gardens • 26 • August 2024