The two-pot retirement system allows people to withdraw funds from their savings pot but they need to think carefully before they do so. Picture: Freepik
On September 1, 2024, the South African democratic government introduced a two-pot system. It has taken the government more than 10 years to implement the two-pot system. The objective of this system is to allow employees access and withdraw (R30 000 maximum) from their pension funds.
According to Cosatu, the two-pot system is their brain child. The biggest union federation in Africa says the system will prevent workers from resigning from their jobs to access their pension funds. They can only withdraw money once in a financial year.
On the other hand, the police union, The Police and Prisons Civil Rights Union (Popcru), is vehemently opposed to the two-pot system. Popcru, a Cosatu affiliate, said the system would not benefit its members. Few days before September 1, the police union urged the government not to implement the system. However, its plea fell on deaf ears, and now it is quiet.
Financial experts are discouraging workers from dipping their hands into their pension funds. Their advice is that workers should only withdraw money if they really need it. Their concern is that workers might deplete their savings. When they retire, they might be left with nothing in their savings pot.
When the two-post system opened, pension administrators were inundated with requests from workers to withdraw from their savings. Some have already received their monies. Interestingly, South African Revenue Service (Sars) is benefiting handsomely from the withdrawals.
I know about 10 people who have applied and received money from their pension savings. Half of them have no plans for that money. That means they are going to blow it, if not already. They say they want to eat their money while they are still alive.
The pertinent question is: How is it the two-pot system beneficial to the workers? It’s not beneficial at all. Some, if not most, workers are going to retire with few hundreds in their savings pot. The government should reconsider this system before it’s too late.
In the past, the system allowed workers to withdraw from their pension funds. However, they paid back the money they had withdrawn without interest. This was a good and ideal system. The government should revert back to it.
THABILE MANGE | Johannesburg
The views expressed here are not necessarily those of Independent Media.
Daily News