BUSINESS NEWS - There has been much controversy regarding the new withdrawal regulation and Retirement funds.
This should come into being on 1 September 2024.
What happens to your existing contributions upto 31 August 2024?
Your existing contributions will be divided into three components (referred to as pots).
All accumulated retirement savings up to 31 August 2024 will go into a vested component/ pot. Then from 1 September 2024 the funds will go into the savings pot.
The vested component will continue to be regulated by the current/ existing rules. Not affected by the new rules starting 1 September 2024.
Money is only accessible from the age of 55 years and you will then have access to 1/3 of the retirement annuity fund in a lump sum. This is taxed after the R 550 000 initial lump – sum tax – free allowance.
The 2/3 of the fund is then invested into a life/ living annuity to provide income which is taxed according to tax tables.
Members younger than 55 on 1 March 2021 with provident funds:
Members younger than 55 years on 1 March 2021 who have a provident fund, will have seed capital taken proportionally from the vested pot in 2021 and non–vested pots.
- Vested Rights are contributions made before 1 March 2024.
- These vested benefits are protected and exempt from annuitisation (new) rules at retirement.
- New contributions after 1 March 2021 are considered non–vested rights. These are subject to the 2/3 annuitisation ( new) rule upon retirement.
Members older than 55 years on 1 September 2024:
If these members want to be part of the Two–pot system they will have to opt – in and after this decision is made they will not be able to reverse the decision.
From 1 September 2024:
One third of your contributions will go into a savings component /pot.
- The savings component receives a once–off capital boost from your vested component. (minimum of 10% of your retirement fund value on 31 August 2024 up to the limit of R 30 000). This is known as seed capital.
- The remaining two–thirds of the new contributions will go into a retirement component /pot. This cannot be accessed until retirement.
- You can access your savings component once it reaches a minimum value of R 2 000. (You may only make one annual withdrawal.)
- Annual withdrawals will be taxed at marginal tax rates.
- Remaining amounts in the savings component/ pot grow tax-free - Until a withdrawal is made.
- There is no maximum withdrawal limit.
Retirement component /pot :
- Preserves at least two–thirds of your retirement fund contributions.
- These funds cannot be accessed on resignation, only at retirement.
- The above is reliant on the Pension Funds Amendment Bill and Revenue Laws Amendment Bill being signed by the President.
- Only once this is done, can retirement funds apply the rule amendments to the Financial Sector Authority and implement the two–pot regime from 1 September 2024.
- Funds will also then communicate with members how savings withdrawal claims will be processed.
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