This year June, President Cyril Ramaphosa signed into law the Revenue Laws Amendment Act that establishes the two-pot retirement system.
Following the signing of the bill, many questions have cropped up in the minds of South Africans about what this new retirement system is and how it will it impact them.
With some help from ChatGPT, here is a look at the two-pot retirement system as if it is being explained to a five-year-old.
This is how ChatGPT explains what the two-pot retirement system to a five-year-old:
"Hey, imagine you have two special piggy banks.
“One piggy bank is for money you get now to buy things you want, like toys or yummy snacks.
“The other piggy bank is like a magic one that keeps your money safe until you're all grown-up and finished with your work. When you're big, you can use that special piggy bank to buy everything you need and have fun!
“Key points to emphasise:
“Two piggy banks: One for things they want now (toys, snacks) and one for when they are older.
“Saving for the future: Explain that the second piggy bank is for when they are all grown-up and done working.“
Important information
Now that the two-pot retirement has been explained to you, here is some crucial that you need to know:
– The official start date is September 1, 2024, however, Guy Chennells, Chief Commercial Officer, Discovery Corporate and Employee Benefits expects that retirement fund members can only start making withdrawals from mid-September 2024.
– John Paul Fraser, tax attorney, Tax Consulting SA said that a withdrawal from the savings pot will be subject to tax at the fund member’s marginal tax rate. The tax on the withdrawals will be paid directly over to Sars by the fund administrator.
– Withdrawals can only be done once in a tax year, which is March 1 to February 28. According to Gontse Tsatsi, head of Retail Clients, Old Mutual Investment Group, withdrawals must be a minimum of R2,000 before tax.
– People need to take note that they are allowed to make one annual withdrawal per policy. Fraser said that an example of this is where an individual is contributing to three policies. The fund member is be eligible to make a withdrawal from each policy.
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