Atleha-edu | Two-Pot Retirement System Member Guide by atleha-edu

TWO-POT RETIREMENT SYSTEM WORKSHOP

This workshop is designed to assist South African retirement fund trustees in gaining a better understanding of the intricacies, challenges, and benefits of the Two-Pot Retirement Fund System.

LEARNING AREAS

Background

The first phase of levelling the playing fields

Preservation and access

Two Pots (or Three Components)

Splitting of contributions

Savings Pot withdrawal limits and tax treatment

Use and limits of Retirement Pot

Member education & communication

This workshop is fully funded for South African Trustees and Principal Officers. Non-trustees can attend for a fee of R1,900 excluding VAT.

Important to know

This guide aims to simplify the two-pot system reform for members of retirement funds. If you would like to white-label the content specifically for your retirement fund, please contact us. Our contact details are at the bottom of the page.

We thank the Satawu National Provident Fund trustees and Marilyn Kamp from Robson Savage for sharing their content. This guide would not have been possible without their assistance.

marilynk@robsav.com www.atleha-edu.org

How to read this

In this guide you will find all the information you need to understand the retirement reform changes from 1 September 2024.

HOW IT WORKS GUIDE

Firstly, don’t worry, you don’t have to read the entire guide. However, understanding these changes is important for you. We encourage you to read each of the points below as they will guide you on how to manage the retirement fund components, or pots, that will make up your retirement fund.

Why is the government changing how you save and withdraw your retirement money?

• Assistance when you have an urgent financial need. The government recognises the financial challenges that some employees are facing and will allow you access to some of your retirement savings before retirement and while you are still working – you will not have to leave your employer to draw out some of your retirement savings

• Assistance in growing your retirement money for when you retire. Retirement fund members often don’t invest their retirement fund money when they change employers nor do they buy pensions with their retirement fund money but rather take the full amount in cash (after tax). If you spend the full amount, you will only have a government pension of about R2 000 per month to live on. You need a decent monthly income when you retire and these new changes will help you achieve this.

Ultimately, the two-pot system was designed to help South Africans strike a balance between long-term retirement savings goals while providing prior access to retirement savings for emergencies and life’s other unexpected events.

Although you don’t need to read every page, you must read all the white pages. Reading the white pages will help you understand your options when leaving the fund, options when retiring from the fund and how the tax will affect you when you access your fund credit.

The two-pot system will affect all members of all retirement funds, but not in the same way. It depends, among others, on your age, when you joined your current fund, and whether you transferred your pension monies between retirement funds.

We’ve tried to make it as easy as possible by creating a variety of members that each represent a different category. Each member has been named, i.e. Aliyah, and colour-coded to make it easy to identify.

You need to figure out which one you are. Use the decision tree on p. 4 to identify which member represents your situation. Once you have identified yourself with a member you only need to read the specified page(s) to see how these changes will affect you.

TO KNOW IMPORTANT

WHAT ARE THE ADVANTAGES OF THE TWO-POT SYSTEM?

• The government hopes that these changes will encourage fund members to manage their money better so that when they retire they have more money, making their lives after retirement better.

• If you have a financial emergency and have no other way to finance your emergency, you can withdraw money from your savings pot, subject to terms and conditions that the government has put in place.

• When members retire, they often have no idea how much money they will be paid at retirement. These changes should allow you to manage your fund money better so that, when you do retire, you know what you are due and can prepare yourself financially for your retirement.

HOW SHOULD I MANAGE MY SAVINGS POT?

You should only take a savings withdrawal benefit out of your savings pot when you have a financial emergency and you have no other option to access money elsewhere because the negative effect of taking money out of this pot is:

• You will be heavily taxed on these withdrawals and your fund administrator might also charge an admin fee which means you will receive much less in your pocket than what you initially applied for. For example, Aliyah takes a savings withdrawal benefit of R10 000. After the tax and an admin fee of R500 were deducted, she only received about R7 500 in her bank account.

• Every savings withdrawal benefit taken from your savings pot will leave you with less money at retirement because your savings pot is actually the 1/3rd part of your retirement benefit that you would have otherwise received as a lump sum at retirement. If you keep taking savings withdrawal benefits out of your savings pot you will be left with little or no lump sum amount at retirement. And you also forgo the R550 000 tax-free lump sum benefit on retirement.

• You will lose the opportunity to earn compound interest over the years until retirement on the amounts that you withdraw from your savings pot.

• Carefully consider whether you really need to take a savings withdrawal benefit from your savings pot rather than to get the money you need elsewhere.

• If you want to take a savings withdrawal benefit, you must make sure that your tax affairs are in order otherwise, when the administrator applies for a tax directive, SARS will not issue it or may demand that the administrator pay them the money to cover any outstanding tax you may have.

WILL ANY OTHER DEDUCTIONS BE MADE FROM MY POTS?

Yes, the following can be deducted:

• A divorce or maintenance order issued against your fund credit.

• A housing loan that you may have that would need to be paid off if you left the fund.

• Compensation payable to your employer in respect of any damage caused to your employer because of theft, dishonesty, fraud or misconduct by yourself that must be proved in a court of law or admitted by you in writing.

• Any savings withdrawal benefit you have taken from your savings pot.

• Any tax that SARS may issue against your fund credit.

Let’s get practical

WHAT TYPE OF MEMBER

To help you understand these changes better, here’s a financial example to explain how these changes will affect you. The financial example gives an assumed average salary earned by a member of a retirement fund and assumed average contributions paid to the rund. This example is used for every category of membership.

Please remember that this is an EXAMPLE only and not your personal financial figures. In all the membership categories the rand and percentages used are just an example. No figures and percentages are those of any member who participates in this fund.

- Aliyah

1 - Aliyah

- Daarani

MEMBER ARE YOU?

1- Aliyah

If you were UNDER age 55 years on 1 March 2021 and you have remained on this retirement fund; or If you were UNDER age 55 on 1 March 2021 and joined the fund after 1 March 2021 and transferred your full fund credit into the fund; or If you were 55 or OVER on 1 March 2021 and joined the fund after 1 March 2021 and transferred your full fund credit into the fund, then you belong to this category of membership.

ALIYAH'S FUND CREDIT = VESTED POT (CASH + ANNUITY) + SAVINGS POT + RETIREMENT POT

VESTED POT

CASH PORTION

The CASH PORTION of your FUND CREDIT will be all your contributions, including interest, paid into the fund up to 1 March 2021 and any further interest added thereafter up to 31 August 2024.

Let us assume that you have R150 000 in your CASH PORTION on 1 September 2024.

RULES OF YOUR CASH PORTION

From 28 February 2021, no further contributions were paid into your CASH PORTION – your FUND CREDIT grew with interest ONLY from 1 March 2021.

You can take your CASH PORTION in cash (after tax) if you leave your employer and the fund BEFORE or AT retirement.

You may transfer your CASH PORTION to your RETIREMENT POT at any time, but not back again.

ANNUITY PORTION

The ANNUITY PORTION of your FUND CREDIT will be all your contributions, including interest, paid into the fund from 1 March 2021 to 31 August 2024.

Let us assume that you have R50 000 in your ANNUITY PORTION on 1 September 2024.

RULES OF YOUR ANNUITY PORTION

From 31 August 2024, no further contributions will be paid into your ANNUITY PORTION – your FUND CREDIT will grow with interest ONLY from 1 September 2024. You can take your full ANNUITY PORTION in cash (after tax) if you leave your employer and the fund BEFORE retirement.

When you RETIRE from the fund, you can ONLY take up to 1/3rd of your ANNUITY PORTION in cash and 2/3rds MUST buy you a pension (annuity).

However, if 2/3rds of your ANNUITY PORTION and your RETIREMENT POT (combined) is less than R165 000 you may take the full amount in cash.

You may transfer your ANNUITY PORTION to your RETIREMENT POT at any time, but not back again.

On 1 September 2024, the fund administrator will transfer 10%, maximum R30 000, from your CASH PORTION and your ANNUITY PORTION to your SAVINGS POT. This process is called "seeding" which will happen only once on 1 September 2024 and never again.

– 10% equals R15 000

SAVINGS and RETIREMENT POTS FROM 1 SEPTEMBER 2024

The SAVINGS and RETIREMENT POTS in your FUND CREDIT will be all your contributions paid into the fund AFTER 1 September 2024 and all interest added thereafter, after any deductions such as insured premiums or administration fees.

From the total contributions of R1 920, the administrator will deduct 6% of your monthly fund salary which will be R720 to pay for your risk benefit premium and administration fees and will pay these to the insurer and the administrator.

The balance of your contributions after these deductions will be R1 200 that will be paid as follows:

SAVINGS POT

1/3rd - R400

EXAMPLE OF YOUR SAVINGS POT

Transfer from your VESTED POT on 1 September 2024 R20 000

Monthly contributions:

September 2024 R400 October 2024 R400

November 2024 R400 December 2024 R400

January 2025 R400 February 2025 R400

March 2025 R400 April 2025 R400

May 2025 R400 June 2025 R400

July 2025 R400 August 2025 R400

After 12 months your FUND CREDIT in your SAVINGS POT will be R24 800 plus interest if you do not take a SAVINGS WITHDRAWAL BENEFIT.

RULES OF YOUR SAVINGS POT

10% to a maximum of R30 000 of your VESTED POT will be transferred to this POT on 1 September 2024.

After 1 September you will be allowed ONLY 1 (ONE) withdrawal of all or part of your SAVINGS POT as a SAVINGS WITHDRAWAL BENEFIT between 1 March to 28 February each year (minimum withdrawal R2 000).

You DO NOT have to leave your employer to take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT.

You WILL PAY TAX (marginal rate - Tax table C, p. 18) on any SAVINGS WITHDRAWAL BENEFIT before retirement.

You may transfer your FUND CREDIT in your SAVINGS POT to your RETIREMENT POT at any time, but not back again.

RETIREMENT POT

2/3rds – R800

EXAMPLE OF YOUR RETIREMENT POT

Monthly contributions: September 2024 R800 October 2024 R800

November 2024 R800 December 2024 R800

January 2025 R800 February 2025 R800

March 2025 R800 April 2025 R800

May 2025 R800 June 2025 R800

July 2025 R800 August 2025 R800

After 12 months your FUND CREDIT in your RETIREMENT POT will be R9 600 plus interest

RULES OF YOUR RETIREMENT POT

You MAY NOT withdraw any of your RETIREMENT POT when you leave your employer.

You can ONLY access your RETIREMENT POT when you RETIRE

At retirement, your RETIREMENT POT MUST be used to buy you a pension (annuity).

However, if 2/3rds of your ANNUITY PORTION of your VESTED POT and your RETIREMENT POT (combined) is less than R165 000 you may take the full amount in cash.

TOTAL FUND CREDIT

If you do not take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT from 1 September 2024 to 31 August 2025, your total FUND CREDIT in all 3 POTS will be R214 400 plus interest as at 31 August 2025.

If you were UNDER age 55 years on 1 March 2021 and joined the fund after 1 March 2021 and chose NOT to transfer any of your previous fund credit to this fund; or If you were 55 and OLDER on 1 March 2021 and joined the fund after 1 March 2021 and chose NOT to transfer any of your previous fund credit to the fund, then you belong to this category of membership.

BONGA'S FUND CREDIT = VESTED POT (ANNUITY PORTION only) + SAVINGS POT + RETIREMENT POT

VESTED POT (ANNUITY PORTION only)

Your FUND CREDIT in your VESTED POT will be all your contributions, including interest, paid into the fund up to 31 August 2024. Let us assume that you have R70 000 in your VESTED POT on 1 September 2024.

RULES OF YOUR VESTED POT

From 31 August 2024, no further contributions will be paid into your VESTED POT – it will grow with interest ONLY from 1 September 2024.

You can take your full VESTED POT in cash (after tax) if you leave your employer and the fund BEFORE retirement.

When you RETIRE from the fund, you can ONLY take up to 1/3rd of your VESTED POT in cash (the first R550 000 is tax-free) and 2/3rds MUST buy you a pension (annuity).

However, if 2/3rds of your VESTED POT and your RETIREMENT POT (combined) is less than R165 000, you may take the full amount in cash.

You may transfer your FUND CREDIT in your VESTED POT to your RETIREMENT POT at any time, but not back again.

On 1 September 2024, the fund administrator will transfer 10%, maximum R30 000, from your VESTED POT to your SAVINGS POT. Example:

VESTED POT R70 000 – 10% equals R7 000 FUND CREDIT left in VESTED POT R63 000

ONE EXCEPTION TO THE RULE

If 2/3rds of your vested pot (annuity portion) and retirement pot combined are equal to or less than R165 000 at retirement you may take the whole amount in cash. This is called the R165 000 de minimis threshold which will be exempt from tax. The de minimis threshold applies to all members.

SAVINGS and RETIREMENT POT FROM 1 SEPTEMBER 2024

The SAVINGS and RETIREMENT POT of your FUND CREDIT will be all your contributions paid into the fund AFTER 1 September 2024 and all interest added thereafter, after any deductions such as insured premiums or administration fees.

We have used the following example to explain more fully. Every month, your employer will continue to deduct from your monthly fund salary of R12 000, the employer contribution of 8% - R960 and your contribution of 8% - R960 which will be a total of R1 920. From the total contributions of R1 920, the administrator will deduct 6% of your monthly fund salary which will be R720 to pay for your risk benefit premium and fund administration fees and will pay these to the insurer and the administrator. The balance of your contributions after these deductions will be R1 200 that will be paid as follows:

SAVINGS POT

1/3rd - R400

EXAMPLE OF YOUR SAVINGS POT

Transfer from your VESTED POT on 1 September 2024

After 12 months your FUND CREDIT in your SAVINGS POT will be R11 800 plus interest if you do not take a SAVINGS WITHDRAWAL BENEFIT.

RULES OF YOUR SAVINGS POT

10%, maximum R30 000 of your VESTED POT will be transferred into this POT on 1 September 2024.

From 1 September 2024 you will be allowed ONLY 1 (ONE) withdrawal of all or part of your FUND CREDIT in your SAVINGS POT as a SAVINGS WITHDRAWAL BENEFIT between 1 March to 28 February each year (minimum withdrawal R2 000).

You DO NOT have to leave your employer to take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT.

You WILL PAY TAX (Marginal rate - Tax table C, p. 18) on any SAVINGS WITHDRAWAL BENEFIT.

You can take your full FUND CREDIT from the SAVINGS POT in cash (after tax) if you leave your employer and the fund BEFORE or AT retirement. If you wait until retirement, you will pay very little, if any tax on this cash.

You may transfer your FUND CREDIT in your SAVINGS POT to your RETIREMENT POT at any time, but not back again.

RETIREMENT POT 2/3rds – R800

EXAMPLE OF YOUR RETIREMENT POT

Monthly contributions:

2024 R800 October 2024 R800

2024 R800 December 2024 R800

2025 R800 February 2025 R800

2025 R800 April 2025 R800 May 2025 R800 June 2025 R800 July 2025 R800 August 2025 R800

After 12 months your FUND CREDIT in your RETIREMENT POT will be R9 600 plus interest

RULES OF YOUR RETIREMENT POT

You MAY NOT withdraw from your RETIREMENT POT when you leave your employer.

You can ONLY access your RETIREMENT POT when you RETIRE

At retirement, your RETIREMENT POT MUST be used to buy you a pension (annuity).

However, if 2/3rds of your ANNUITY PORTION of your VESTED POT and your full RETIREMENT POT (combined) is less than R165 000 you may take the full amount in cash.

TOTAL FUND CREDIT

If you do not take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT from 1

CREDIT in all 3 POTS will be R84 400 plus interest as at 31 August 2025.

If you were 55 years or OLDER on 1 March 2021 and you have remained on the fund and choose to have the savings and retirement pots, then you belong to this category of membership.

CHARLOTTE'S FUND CREDIT = VESTED POT (CASH PORTION only) + SAVINGS POT + RETIREMENT POT

VESTED POT (CASH PORTION only)

Your FUND CREDIT in your VESTED POT will be all your contributions, including interest, paid into the fund up to 31 August 2024. Let us assume that you have R650 000 in this PORTION on 1 September 2024.

RULES OF YOUR VESTED POT

From 31 August 2024, no further contributions will be paid into your VESTED POT – your FUND CREDIT will grow with interest ONLY from 1 September 2024.

You can take your full VESTED POT in cash (after tax) if you leave your employer and the fund BEFORE or AT retirement or you can use all or part of it to buy a pension (annuity). You do not pay any tax on the annuity part.

You may transfer your FUND CREDIT in your VESTED PORTION to your RETIREMENT POT at any time.

On 1 September 2024, the fund administrator will transfer 10%, maximum R30 000, from your VESTED POT to your SAVINGS POT.

Example:

VESTED POT

R650 000

10% would be R65 000 but only a maximum of R30 000 can be transferred to your SAVINGS POT

Transfer to your SAVINGS POT R30 000

FUND CREDIT left in your VESTED POT

R620 000

SAVINGS and RETIREMENT POTS FROM 1 SEPTEMBER 2024

Your FUND CREDIT in your SAVINGS and RETIREMENT POTS will be all your contributions paid into the fund AFTER 1 September 2024 and all interest added thereafter, after any deductions such as insured premiums or administration fees.

From the total contributions of R1 920, the administrator will deduct 6% of your monthly fund salary which will be R720 to pay for your risk benefit premium and fund administration fees and will pay these to the insurer and the administrator. The balance of your contributions after these deductions will be R1 200 that will be paid as follows:

SAVINGS POT 1/3rd - R400

EXAMPLE OF YOUR SAVINGS POT

Transfer from your VESTED POT on 1 September 2024

After 12 months your FUND CREDIT in your SAVINGS POT will be R34 800 plus interest if you do not take a SAVINGS WITHDRAWAL BENEFIT.

RULES OF YOUR SAVINGS POT

10%, maximum R30 000 of your VESTED POT will be transferred into this POT on 1 September 2024.

From 1 September you will be allowed ONLY 1 (ONE) withdrawal of all or part of your SAVINGS POT as a SAVINGS WITHDRAWAL BENEFIT between 1 March to 28 February each year (minimum withdrawal R2 000).

You DO NOT have to leave your employer to take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT.

You WILL PAY TAX (Marginal rate - Tax table C, p. 18) on any SAVINGS WITHDRAWAL BENEFIT.

You may transfer your SAVINGS POT to your RETIREMENT POT at any time.

EXAMPLE OF YOUR RETIREMENT POT

RULES OF YOUR RETIREMENT POT

You MAY NOT withdraw any of your FUND CREDIT in your RETIREMENT POT when you leave your employer.

You can ONLY access your FUND CREDIT in your RETIREMENT POT when you RETIRE.

At retirement, your FUND CREDIT in your RETIREMENT POT must be used to buy you a pension (annuity).

However, if 2/3rds of your FUND CREDIT in your RETIREMENT POT is less than R165 000 you may take the full amount in cash.

TOTAL FUND CREDIT

If you do not take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT from 1 September 2024 to 31 August 2025, your total FUND CREDIT in all 3 POTS will be R664 400 plus interest as at 31 August 2025.

4 - Daarani

If you become a new member of the fund on or after 1 September 2024 with no transfers into the fund from 1 September onwards, then you belong to this category of membership.

DAARANI'S FUND CREDIT = SAVINGS POT + RETIREMENT POT

SAVINGS and RETIREMENT POTS FROM 1 SEPTEMBER 2024

We have used the following example to explain more fully. Every month, your employer will continue to deduct from your monthly Fund salary of R12 000, the employer contribution of 8% - R960 and your contribution of 8% - R960 which will be a total of R1 920.

The balance of your contributions after these deductions will be R1 200 that will be paid as follows:

SAVINGS POT 1/3rd - R400

EXAMPLE OF YOUR SAVINGS POT

Monthly

RETIREMENT POT 2/3rds – R800

EXAMPLE OF YOUR RETIREMENT POT

Monthly contributions:

After 12 months your SAVINGS POT will be R4 800 plus interest if you do not take a SAVINGS WITHDRAWAL BENEFIT.

RULES OF YOUR SAVINGS POT

After 1 September you will be allowed ONLY 1 (ONE) withdrawal of all or part of your SAVINGS POT as a SAVINGS WITHDRAWAL BENEFIT between 1 March to 28 February each year (minimum withdrawal R2 000).

You DO NOT have to leave your employer to take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT.

You WILL PAY TAX (Marginal rate - Tax table C, p. 18) on any SAVINGS WITHDRAWAL BENEFIT.

You can take your full SAVINGS POT in cash (after tax) if you leave your employer and the fund BEFORE or AT retirement. If you wait until retirement, you will pay very little, if any tax on this cash. You may transfer your FUND CREDIT in your SAVINGS POT to your RETIREMENT POT at any time, but not back again.

RULES OF YOUR RETIREMENT POT

You MAY NOT withdraw from your RETIREMENT POT when you leave your employer.

You can ONLY access your RETIREMENT POT when you RETIRE.

At retirement, your RETIREMENT POT MUST be used to buy you a pension (annuity).

However, if your RETIREMENT POT is less than R165 000 you may take the full amount in cash.

If you do not take a SAVINGS WITHDRAWAL BENEFIT from your SAVINGS POT from 1 September

CREDIT in the 2 POTS will be R14 400 plus interest as at 31 August 2025.

If you were 55 or OLDER on 1 March 2021 and you have remained on the fund and choose NOT to have the savings and retirement pots, then you belong to this category of membership.

ESAIA'S FUND CREDIT = VESTED POT

VESTED POT

Your FUND CREDIT in your VESTED POT will be all your contributions, including interest, paid into the fund up to 31 August 2024.

From 1 September 2024, nothing will change for you and your net contributions will continue to be paid into your VESTED POT until you either leave the employer and fund OR retire.

From the total contributions of R1 920, the administrator will deduct 6% of your monthly fund salary which will be R720 to pay for your risk benefit premiums and administration fees and will pay these to the insurer and the administrator.

The balance of your contributions, after these deductions will be R1 200 that will be paid into your VESTED POT.

Let us assume that you have R650 000 in your VESTED POT as at 1 September 2024.

EXAMPLE OF YOUR VESTED POT

FUND CREDIT in your VESTED POT as at 1 September 2024 is R650 000 Monthly contributions:

After 12 months your FUND CREDIT in your VESTED POT will be R664 400 plus interest.

RULES OF YOUR VESTED POT

As you were OVER age 55 years on 1 March 2021, your FUND CREDIT in total is your VESTED POT and will remain as such until you leave the fund before or at retirement as you have chosen not to be part of the SAVINGS and RETIREMENT POTS.

You can take your full FUND CREDIT from your VESTED POT in cash when you leave your employer and the fund BEFORE or AT retirement, but you can also use all or some of your FUND CREDIT in your VESTED POT to buy a pension (annuity) at retirement.

THE CHOICE IS YOURS

You have a choice up to 31 August 2025 to have a SAVINGS POT and RETIREMENT POT as part of your retirement package.

If you decide to take this option, you will change from Category 5 (Esaia) to Category 3 (Charlotte) and the rules under Charlotte will then apply to you.

If you decide not to take up this option by 31 August 2025, your FUND CREDIT will remain in your VESTED POT.

What are my

OPTIONS?

You can withdraw or transfer funds from your pots in certain situations, but there are consequences. First, you must identify which pots apply to you (p. 4). Once you understand which ones apply to you, you need only read the relevant information. For example, Aliyah has a cash portion in her vested pot so she has to read about all three pots. In contrast, Daarani only has to read the information that applies to the savings and retirement pots.

EVENT THAT TRIGGERS YOUR OPTIONS VESTED POT

No withdrawal allowed

Options while you are still an employee

Options when leaving your employer

You can transfer this fund credit to your retirement pot at any time.

No withdrawal allowed

You can transfer this fund credit to your retirement pot at any time.

Options when you retire from your retirement fund

Take all or part in cash (after tax) or Transfer* all or part to: your new employer’s retirement fund a preservation fund a retirement annuity fund or

leave invested and preserved in your current retirement fund.

Take all or part in cash (after tax) or

Buy a monthly pension (annuity) with all or part of the money.

Take all or part in cash (after tax) or Transfer* all or part to: your new employer’s retirement fund a preservation fund a retirement annuity fund or leave invested and preserved in your current retirement fund.

1/3rd can be taken in cash (after tax) and 2/3rd must be used to buy you a monthly pension (annuity) unless

2/3rds of this portion and your full fund credit in your retirement pot (combined) is less than R165 000, then you may take the full amount in cash.

What happens when I retire?

After 1 September 2024, you might have money in your vested (annuity portion only) and retirement pots that, by law, cannot be paid to you as a cash lump sum when you retire. Before you complete any retirement forms, you must obtain a letter from the fund that explains what you can withdraw in cash and what must be used to buy a pension (annuity) at retirement.

Remember, the money in your retirement pot can only be used by you to buy an annuity when you retire.

Book an appointment with a retirement benefits counsellor to understand the different types of pensions (annuities) you can choose from – see the options on p 19. Also, talk to a certified financial planner who will assist you with your financial decisions.

SAVINGS POT RETIREMENT POT

From 1 September 2024, R2 000 or more can be withdrawn from this pot in a tax year, from 1 March to 28 February. This withdrawal is called a Savings Withdrawal Benefit and may happen only once in a tax year.

You can transfer your fund credit in this pot to your retirement pot at any time, but not back again.

Take all or part in cash (after tax) or Buy a monthly pension (annuity) with all or part of the money in this pot.

No withdrawal allowed

Your fund credit in this pot can not be withdrawn when you leave an employer and will only be available to you when you retire.

Transfer* all or part to: your new employer’s retirement fund a preservation fund a retirement annuity fund or leave invested in your current and preserved retirement fund.

Full amount in this pot must be used to buy you a monthly pension (annuity) unless if 2/3rds of your fund credit in your vested pot (annuity portion) and your full fund credit in your retirement pot (combined) is less than R165 000, then you may take the full amount in cash.

one of your pots in your current retirement fund and transfer the others. They must all be transferred together or all of them must remain in your current fund. .

from age 55 years, late retirement (if allowed by your employer) or ill-health early retirement (at any age and as accepted by the trustees of the fund).

HOW WILL TAX AFFECT MY POTS?

This section explains how tax affects each pot. Firstly, identify the pots that apply to you by following the decision tree on p 4. Once you know which pots are relevant, you need only read the information that applies to those pots.

EVENT THAT TRIGGERS TAX ON YOUR POTS VESTED POT

Retirement Withdrawal Tax Table (Table A) Retirement Withdrawal Tax

(Table A)

Tax on withdrawal before retirement from each pot

Retirement Tax Table (Table B)

Tax on retirement

Up to a maximum of 1/3rd - Retirement Tax Table (Table B) The 2/3rds used to buy an annuity are not taxed. (However, you might pay tax on your monthly pension - marginal tax rate (PAYE), Tax Table C)

Think of your future self

Although the government has made these reforms to give you access to some savings before retirement, it is never in your best interest to withdraw monies from your fund before you retire. Only withdraw from your savings pot in case of an emergency. You will be taxed on the withdrawal amount, and have less cash and income when you retire. Try as far as possible to keep all your retirement savings invested until retirement, including any savings in your savings pot.

SAVINGS POT RETIREMENT POT

Your marginal tax rate (PAYE) that is deducted from your salary. Depending on how much you withdraw annually from this pot you may end up with a higher rate at the end of the tax-year (28 February). .

(Table C)

Retirement Tax Table (Table B)

During your entire working career and whilst you are a member of a retirement fund, you cannot withdraw any of the money in this pot so tax on withdrawal is not applicable to this pot.

The government rewards you for saving

The government wants you to save the money (fund credit) in all three pots until you retire. They amply reward you with a tax benefit if you do this. When you retire, you may withdraw a third of your retirement savings – up to R550 000 of that lump sum is tax-free.

To further incentivize you to wait until retirement, the government heavily taxes early withdrawals. If you withdraw from your pots before retirement you pay a lot of tax and miss out on – one day –receiving R550 000 tax-free.

This is another reason a savings withdrawal benefit must be your last resort, and only in an emergency.

SARS Tax tables

How will I be taxed if I… …withdraw from my savings pot? All

Tax Table C. …withdraw from my retirement pot before

All lump

cash amounts taken from all

pots will be added together and taxed as per the Withdrawal Tax Table A. …withdraw at retirement? All lump sum cash amounts taken from all applicable pots will be added and taxed as per the Retirement Tax Table B. This applies to lump sum retirement, death, disability and retrenchment benefits taken in cash (The below tax rates are a once-off over all the money paid out of your retirement fund).

TABLE A (Lump sum withdrawals taken in cash from retirement funds before retirement)

TABLE C

TABLE B

What are my choices at RETIREMENT?

Under the two-pot system, when you retire you must buy an annuity with the entire amount in the retirement pot. In general, an annuity pays you a regular income or pension during your retirement. Typically, you can choose between a guaranteed life annuity, a living annuity or a combination of the two.

Here is a brief explanation but full details of these products will be explained to you by your certified financial planner or the service provider once they understand your circumstances and needs.

GUARANTEED LIFE ANNUITY

A life annuity is a policy with a life insurance company. Your monthly income consists of a guaranteed base amount plus a yearly increase. The guaranteed amount never changes, even in the event of a market crash or if you live much longer than you expected.

LIVING ANNUITY

A living annuity is an investment portfolio with an investment company of your choice; therefore, your income depends on the amount invested, how much you choose to draw down every year and the performance of the underlying investments. Every year you can choose what amount you want to withdraw of your capital –within a range of 2,5% and 17,5%.

On death no further benefit is payable to your dependants unless you have chosen this option at the time of buying the annuity. Other options like guarantee periods of payment in the event of your death and increases to your annuity are also available at time of buying your annuity.

The insurer takes the investment risk. You will receive a monthly pension as long as you live, whether you turn 65 or 105 years old.

Tax after retirement

After retirement, the monthly pension you receive from your annuity will be taxed at the same rate as a monthly salary. See Tax table C on the opposite page.

Every year on the same date, you will have a choice to change the percentage you can take for the next year.

If the percentage you choose to draw is higher than the investment growth your investment will have a lower value and will be able to pay you a lower pension (annuity) in the next year but, if the investment has a low growth, the pension may be lower in the following year.

On death, the balance in the investment is payable to your dependants.

You take the investment risk. There is the risk of outliving your capital.

Speakinglifeintoinvestmentdecisions

www.atleha-edu.org

In Sesotho, when you tell someone to “Atleha” you are telling them to prosper. By combining “Atleha” and “edu” we want to contribute to quality financial education.

Our purpose at Atleha-edu, a non-profit company (NPC), is to help ordinary South Africans save and invest for a better tomorrow. We do this through Financial Sector Code (FSC)-compliant awareness and interactive education programmes focused on retirement fund trustee, principal officer, management committee member, and fund member awareness and education initiatives.

We provide accessible, quality consumer financial educational (CFE) content via multidple platforms

Click below to view some of our educational content:

Per the requirements of FSTC Guidance Note 500, all Atleha-edu resources on the Atleha-edu website are made available to retirement fund trustees, principal officers and members at no cost. Atleha-edu has full editorial control over educational content and funder branding.

Atleha-edu’s CFE offers the following benefits:

• Retirement Fund Trustee and Member education on topical retirement fund issues, as envisioned by the Financial Sector Conduct Authority (FSCA) and Financial Sector Code (FSC)

• A mixture of educational publications, short articles, video and audio content (including translations into various African languages, such as isiZulu, Sesotho and isiXhosa)

• Educational content accredited for BATSETA Continuous Professional Development (CPD)

• All content is available at no cost

• No funder or service provider product marketing as per FSTC Guidance Note 500

Monitoring Evaluation and Learning (ME&L)

All our Atleha-edu educational content and initiatives are aligned to a formal Theory of Change and Monitoring Evaluation and Learning (ME&L) programme. An external Monitoring and Evaluation service provider reviews our ME&L programme on an annual basis. The ASISA Foundation also reviews all Atleha-edu educational content and initiatives where it has specifically been a funder or co-funder.

Our funders and strategic partners:

Atleha-edu NPC receives FSC Consumer Financial Education funding from a number of industry partners and funders.

We are most grateful to the ASISA Foundation, ASISA Academy, Alternative Prosperity Foundation and BATSETA Council of Retirement Funds for South Africa for their strategic partnership and funding and implementation support.

A full list of our funders is available via https://atleha-edu.org/partner-with-us/

Financial Sector Code (FSC) Consumer Financial Education compliance

Per the FSC requirements, an independent third-party service provider annually reviews all our Atleha-edu educational content and CFE initiatives and issues Atleha-edu NPC with an annual Independent Competent Persons Report (ICPR). The ICPR is provided to CFE funding partners who are then able to use the Atleha-edu ICPR when claiming FSC Scorecard points for their Consumer Financial Education spend through Atleha-edu NPC.

www.atleha-edu.org/trustee-education/ to receive free FSC-compliant educational content from Atleha-edu NPC via our website (www.atleha-edu.org/) as well as via a weekly Atleha-edu educational email on a Friday at

Empowering the Workforce and demystifying the Two-Pot Retirement System

WageWise is a financial education programme which aims to empower employees with the necessary knowledge, skills, awareness and tools to effectively manage their finances and develop ongoing financial resilience. With the introduction of the Two-Pot Retirement System, the importance of saving for retirement and understanding the Two-Pot system is covered in the training.

WageWise, which launched in 2015, has trained over 80 000 employees from different businesses across the country to date. It is made possible by the ASISA Foundation and primarily funded by the Sanlam Foundation. The training is offered free of charge to employers to train their employees at their worksites.

Most South Africans have high levels of debt and low levels of savings. Within worksites, strains on employees’ finances mean that they are not adequately prepared for paying for their children’s education, saving for retirement, or coping with unforeseen emergencies. Financial stress also impacts health and productivity, which ultimately affects employers. It is now more critical than ever that people learn how to manage their money better.

Through research conducted with participants there is evidence of an overall improvement in financial behaviours such as budgeting, tracking expenditures and saving including saving for emergencies. WageWise enables employees to take control of their finances and change their financial behaviour and their attitude towards money.

Financial education is also crucially important for employers as studies indicate that it leads to a more engaged and effective workforce as employees’ financial stress is reduced and their morale and productivity improves.

WageWise engages employees who align to the profile of the Financial Sector Code which requires that participants be primarily Black South African of which 40% needs to benefit Black South African women and have an income threshold of R340,000 p.a. (R28,500 per month).

The primary learning channel is in-person, interactive workshops. There are four versions of workshops which enable employers to select a version that best suits their workplace requirements.

Content themes include planning with money and budgeting; credit and debt management; savings, retirement planning including the Two-Pot Retirement System; wills; managing risk and insurance, consumer rights and recourse, and the role of a financial planner.

For more information on WageWise please contact us as per below.