Focus on Retirement Funds
This month we take an in-depth look at the new 2-pot system and the impact this has on employers, retirement funds, the economy and of course the prospect of comfortable retirement.
This legislation changes the way retirement savings are managed, with implications for both employers and retirement funds. Under the 2-pot system, employees’ retirement contributions will be split into two “pots” – one accessible during their working life and the other reserved for retirement.
For employers, this new system brings with it a host of legal obligations and adjustments. Employers must now align their policies with the new regulations, updating employment contracts, payroll systems and retirement fund contributions to comply with the split allocation requirements. The impact on retirement funds is equally significant. Fund administrators will need to navigate complex adjustments to their systems, ensure compliance with new rules and communicate these changes effectively to their members.
Failure to comply with the legislation could expose employers and retirement funds to potential legal disputes and penalties. It is crucial for all stakeholders to understand the legal nuances and prepare accordingly to ensure a smooth transition to this new era of retirement savings. Consulting with legal experts will be essential to navigate these changes effectively and minimise risks.
Watch our panel of experts unpack the new 2-pot retirement systems as it affects employers and retirement funds:
What is the new 2-pot retirement system?
The 2-pot system splits retirement contributions into two parts: one accessible pot for pre-retirement withdrawals (up to one-third of contributions) and a preservation pot strictly for retirement savings.
When does the 2-pot system come into effect?
The new system was implemented on 1 September, 2024, affecting all future contributions to retirement funds from this date.
How will the 2-pot system impact employers?
Employers must update payroll systems, employment contracts, and retirement fund arrangements to align with the new contribution split requirements.
Can employees access their retirement savings before retirement?
Yes, under the new system, employees can withdraw from the accessible pot, but the preservation pot remains locked until retirement.
What happens if an employer or retirement fund fails to comply with the new rules?
Non-compliance could result in legal disputes, financial penalties, and reputational damage for both employers and retirement funds.
In-depth Analysis:
Pension Fund reforms: Two-Pots Retirement System
By Nelson Tjiane