Allan Gray Two Pot System
As a retirement fund member, it is important to be aware of changes to your retirement products, which will come into effect when the new two-pot retirement system is implemented on 1 September 2024. However, no action is required from you.
The new system should not change how you think about or invest your retirement savings and should not have any bearing on your long-term retirement savings goals. The new system aims to balance two goals – to improve the preservation of retirement savings until retirement, while also providing access to a portion of accumulated savings in case of severe financial stress.
What will happen after 1 September 2024?
All retirement contributions from 1 September 2024 will be split between two components: Two-thirds will be allocated to the retirement component, which will be inaccessible before you retire, and at retirement must be used to purchase a retirement income product. One-third will be allocated to the savings component, which you can access once per tax year. Existing assets on the implementation date will be vested and allocated to the vested component; your existing rights will continue to apply to the vested component, but you will not be able to make future contributions to this component.
On the implementation date, 10% of the market value of your retirement account on 31 August 2024, subject to a maximum of R30 000, will be transferred from your vested component to your savings component through a once-off process called seeding.
Accessing your savings component in times of need
You should only withdraw from your savings component as a last resort where, without such access, the alternative would likely lead to worse financial outcomes. Withdrawing could significantly reduce the amount you have available at retirement. Given the impact that withdrawals may have on your long-term retirement planning, you should talk to your independent financial adviser before deciding to withdraw.
Other important considerations
▪ You are only permitted to make one withdrawal of at least R2 000 per tax year from your savings component.
▪ Withdrawals from your savings component are taxed at your marginal tax rate and you will receive the after-tax amount, less any amounts owing to SARS.
▪ There are no penalties for not withdrawing and the amount in your savings component will continue to grow as part of your retirement account and will also be available to you for future withdrawals.
Withdrawal instructions must be submitted via your secure online account
If you have not registered for an online account, you can do so by completing and returning the Online registration form to instructions@allangray.co.za
How long will withdrawals take to be processed?
The timeline for a savings component withdrawal will depend on whether you are making a full or partial withdrawal from your savings component. Once we receive your online withdrawal instruction, we will apply for a tax directive from SARS. We will make every effort to complete the withdrawal and have it reflecting in your bank account within 10 business days. However, this timeline may be extended due to potential delays at SARS when processing the tax directive or unforeseen circumstances, such as an unusually high volume of requests.
To read more about the two-pot retirement system, please visit the Two-pot retirement system info hub on our website.