Finance Deputy Minister urges responsible use of retirement savings

Finance Deputy Minister David Masondo has encouraged fund members to use their retirement savings sparingly, and only when there is an urgent and dire need.

In less than three weeks, retirement funds across the country will implement the Two-Pot Retirement System.

READ | Fund members urged to get financial advice on pension fund withdrawals

“With the new reforms, members will now be able to withdraw a portion – up to a third – of their retirement savings before retirement, while still preserving funds. They should seek trustworthy financial advice to consider the implications of withdrawing from their savings component,” the Deputy Minister said on Tuesday.

Addressing the Old Mutual Thought Leaders Forum, Masondo emphasised the importance of financial literacy, financial education, and financial advice in this context.

“It is important to note that administration costs and tax at marginal rates will be deducted from such withdrawals. In addition, members will also lose out on all related future growth and the retirement benefit originally intended for those funds.”

The Two-Pot Retirement System is the latest in a series of comprehensive reforms implemented by the South African government to simplify and harmonise the pension system, incentivise pension savings, and increase the fairness of the retirement system. – SAnews.gov.za