The new Two-Pot Retirement system will not impact the current tax treatment of retirement fund contributions. Members can claim a tax deduction for up to 27.5% of contributions capped at R350 000 annually.

The Two-Pot Retirement system will apply to the Government Employees Pension Fund (GEPF). However, the mechanisms will differ due to the nature of the GEPF, which is a defined benefit fund. GEPF will likely provide more details on how it will work for their fund closer to the effective date.

The Two-Pot Retirement system primarily affects how future retirement fund contributions are managed. Therefore, it's unlikely to affect those who have already retired and are no longer contributing to their retirement funds.

The Two-Pot Retirement system will give these individuals a new structure for future contributions. It will require a reassessment of their retirement strategies, especially considering the accessibility of the savings pot. Consulting with an Old Mutual financial adviser would be beneficial.

As of the effective date, members of provident funds who are over 55 will be given an option to move into the new Two Pot system. Should they decide to remain within their existing structure, their contributions will continue to be allocated to the Provident Fund vested pot, and they will be able to access up to 100% of their benefit in cash at retirement.

If they opt to move into the new Two-Pot Retirement system, their future contributions will be allocated to the savings and retirement pots. They can access money from their savings pot but will be forced to buy an annuity if their retirement pot exceeds R165 000 at retirement.

Under the Two-Pot Retirement system, withdrawals from the savings pot will have tax implications. Members can access money from their savings pot before retirement, although this is limited to once a tax year. The minimum withdrawal amount from the savings pot is set at R2 000, with no maximum amount.

However, it must be noted that any amount withdrawn from your savings pot will be considered part of their taxable income for the corresponding tax year and will be taxed at their applicable marginal rate. This should be considered when considering any withdrawals. It will also impact the amount of money members will have at retirement.

The Two-Pot Retirement System does not impact the tax deductibility of contributions; this remains unchanged.

We understand that the Two-Pot Retirement system should not change your ability to have Section-14-member fund balances. The administrator would need to indicate the pot that holds each of the contributions, and they would need to be allocated to similar pots in the new fund.

We understand there is no intention to change the rules around the vested pot in the future. The reason behind establishing the vested pot is to ensure that members’ existing rights remain protected.

Financial advisers will have to familiarise themselves with the new structure and its implications for their clients. They must adjust their advice strategies and business models to accommodate the new system.

This information is currently unavailable and is yet to be specified.

The new system should not change how the Death Benefit in Retirement Funds is treated. The total benefit will be subject to section 37C of the Pensions Fund Act.

Financial planners must familiarise themselves with the rules and implications of the Two-Pot Retirement system to guide their clients effectively. They will also need to ensure that clients understand the purpose of their contributions and the impact of early withdrawal on their long-term retirement plans.

While the Two-Pot Retirement system changes how contributions are allocated and accessed, it does not change an individual’s risk profile. Investment recommendations must still be based on the individual’s unique circumstances, risk tolerance, and financial goals. It is also important to remember that the primary purpose of a retirement fund is still for retirement funding. The savings pot is essentially an allocation to a member’s lump sum benefit retirement, and therefore a long-term investment strategy should be considered.

At this stage, we do not believe this will change. However, more information will be provided closer to the effective date.