Professor Elda du Toit says the retirement system can actually be divided into three pots
The two-pot system will bring huge changes to how South African retirement funds operate. the changes also include what happens when one resigns.
Professor Elda du Toit, Professor of Financial Management at the University of Pretoria, says although it is called the “two-pot system”, it is actually a “three-pot” system.Du Toit says you will have an option on what to do with all three pots when you leave your job before retirement.When it comes to the vested pot, the money can be taken out, transferred to a new fund, or left paid up in the existing fund.
The savings pot allows for limited withdrawals before retirement. A portion of your retirement savings will be moved to your savings pot. As much as the system offers benefits, there are some disadvantages to consider. Withdrawals from the savings pot will be subject to taxation. This means that the amount withdrawn will be added to the member’s taxable income for the year and taxed accordingly.
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