LISTEN: South Africans warned 'not to touch' pension funds before retirement

LISTEN: South Africans warned 'not to touch' pension funds before retirement

The two-pot retirement system officially came into effect on Sunday. 

Retirement
Retirement / iStock

Both the Pension Funds Amendment Act and Revenue Law Amendment Act provide for pension fund members to access a portion of their funds before retirement. 

The legislation creates a savings pot for a third of the funds, while the other two-thirds will be kept in the second pot for retirement.

Neil Roets from Debt Rescue SA says South Africans do not understand and appreciate the consequences associated with the two-pot system. 

He says the new law goes against everything that a pension fund is supposed to be. 

"It is understandable that people are glad about this and they see this in a positive light, because people are always happy when they have access to money.

"But we have to look at the bigger picture here and, in my opinion, the two-pot system goes against everything that a pension fund is and tries to be and that is to save for the day that you retire. 

"As soon as you have access to that then it will not necessarily be enough to look after you when you retire."

He says it would be best for people not to touch any portion of their pension funds.

"You should not even look at your pension fund because when you take money out of your pension fund now, what is going to happen one day when you reach that stage when you retire?

"You are not able to generate enough income, and the money that you saved up in the form of a pension fund is depleted, or can only take you halfway. 

"People must look at the bigger picture and have the necessary discipline not to even look at their pension fund in terms of early withdrawal."

Listen to more local news below Jacaranda
Jacaranda FM

Show's Stories