The Proposed Two-Pot System

Member Newsletter

Quarter 2 • 2023

Dear Member

In this newsletter we tell you more about pension-backed home loans – where your loan is secured by your retirement fund savings, rather than by a mortgage bond. You can borrow up to 80% of your after-tax withdrawal benefit to help purchase or improve a home. You may also use the loan to finance alternative energy solutions.

The proposed two-pot system for your retirement savings is expected to come into effect in March next year. We explain how this will give you access to your retirement savings for use in emergencies. You will be able to withdraw up to one-third of your retirement savings as a cash lump sum once a year.

In this newsletter we describe why local infrastructure assets have been included in the Fund’s investment strategy.

In This Newsletter:

The proposed two-pot system

The government has proposed A two-pot system for retirement savings, which is expected to come into effect ON 1 March 2024.
THIS WILL ALLOW YOU to access up to 33% of YOUR retirement savings once a year, while preserving the rest for retirement.

Access to your retirement savings

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If you die while working for Woolworths, the death benefits that are payable to your beneficiaries are investigated and distributed by the Trustees. This is governed by section 37c of the Pension Funds Act.

Fund benefits do not form part of your estate and are therefore not distributed according to your Will.

One of the objectives of the government’s proposed two-pot system is to encourage you to save for your retirement and at the same time provide you with limited access to your retirement savings for emergencies.

With the cost of living continuing to increase, many people are struggling to make ends meet and save for retirement at the same time.

This leads to some people resigning from their employer to gain access to their retirement savings to pay off accumulating debt and meet their basic needs. In many cases, these people do not have any new employment opportunities. Currently, you have no access to the money you have saved in your retirement fund, unless you resign. The two-pot system is seen as a way to allow you to access a portion of your retirement savings without having to resign.

The two-pot system

All your retirement contributions after 1 March 2024 will be allocated as follows – one-third to the savings pot and two-thirds to the retirement pot. You may transfer from your savings pot into the retirement pot, but you may not transfer out of the retirement pot. When you retire, the total amount in the retirement pot must be used to purchase an annuity.

Making withdrawals

Under the two-pot system, from 1 March 2024 you will be allowed to withdraw up to one-third (33%) of your retirement savings as a cash lump sum once a year. This will come from the savings pot. Tax will apply to any cash lump sums that you withdraw.

The retirement pot

For long-term financial security

Two-thirds of your contributions made from 1 March 2024 will be allocated to this pot. You will not have access to this portion of your funds until you retire. It is envisaged that this will improve retirement outcomes for most members.

The savings pot

For short-term financial relief

One-third of your contributions made from 1 March 2024 will be allocated to this pot. After 1 March 2024 you may withdraw lump sums once a year from this pot while you are employed.

Short-term emergencies

This system aims to help members save for retirement while allowing some flexibility for short-term emergencies.
KEEP YOUR MONEY INVESTED AND ONLY WITHDRAW YOUR SAVINGS FOR AN EMERGENCY.
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