The two-pot system, which came into effect on September 1, is aimed at helping South Africans save more efficiently for retirement and safeguard their savings.
The new system divides retirement savings into two “pots” — savings and retirement — and allows you to have access to the savings component without resigning from your job or cashing out of your fund.
“While two-pot is designed to enhance retirement planning and financial security, the emergency savings pot should be used with caution. And if you do withdraw, then you better have a financially sound plan driving that decision,” advises JJ van Wyk, executive financial adviser at Momentum Financial Planning.
He advises:
- Before making any decisions about your retirement savings, speak to a professional;
- A financial adviser will help you to understand the long-term implications of withdrawing money from your savings;
- The new system is designed to provide flexibility and security, but ensure you do your homework before you decide on a plan of action; and
- It can be tempting to withdraw from your savings pot, but keeping the money invested in your retirement fund will allow it to grow and provide for you after retirement.
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