Broadcast Type: Interview; Tags: Light, Navigate, Provide, Answers, Lot, Questions, Thinking, System, Joined, Executive, Financial, Planning, Nmg, Benefits, Pot, Retirement, System, Good, Evening, Siki, Happy, Pot, Retirement, System, Set, September
it's monday its personal finance time and this week we're some taking a look at important decisions or important considerations at when looking retirement a lot of questions coming up of have been late around how with a to deal navigate this new two pot retirement system and i've got an expert on the line who's going to be shedding on how some light to navigate this and some answers hopefully provide to a lot of the questions that i've been getting and that we've all been thinking about while or out about the since we found system i'm joined on line by the end of it who the executive head for financial is planning at nmg to take benefits a look at the retirement system two pot good evening siki on always to speak to you happy let's get it with the two pot right into retirement system currently we've got a date set first out of the of september for implementation still but there is obviously a couple of considerations rational up in the air and some of those include legislative considerations key summary just give us a quick of where we stand at the moment ja the two pieces of legislation that still need that to go through the whole for process two port to be really enforce is obviously the issue around income tax get into and we'll that of of your money when you take you obviously going to be taxed on us in terms of the two system and then pot in the last one is the regulation twenty eight and regulation twenty-eight speaks specifically to with retirement funds of and the rules what type of asset and you invest where can your money offshore local in shares is it is it in or equities is it in cash or and money market and and the implication of withdraw your funds a major has implication on what your asset allocation is etcetera etcetera so so legislation those pieces of need to be still propagated and to the whole gone process before implementation of port to so let's look at the practical of it steven in side terms of implementation we when get into the two pot system right effectively we have to ports the same stove the same ingredients in the ports it all work how does okay so it's to actually not ports it's three port and so now it sounded but your three port money is the prior to the prior to let's say the eleven fifty nine the thirty august two thousand first of and twenty for before the first the day of september you have money in that part which is your money prior to the new two pot system and call that the they vested pot money so that's the that's vesting prior to that date is there a specific eran amount so that's first thing to the keep in mind then once you move over to the first of september there are two pot now those that of you that know about your pension provident a few years back fund the rules were changed where your pension and provident fund contributions when now you retire both have the same of one rules third you can withdraw and to search you can invest a living into what we call or a life annuity want so i almost say you need into to take that consideration to say third there is a one portion that goes into a savings pot and in a two third into portion that goes retirement pot but the vested portion can you have a portion of that vested bought move over into your savings first pot into the of september and are a few rules around that the first one is you have a can maximum of tenth ten percent thirty or thousand rand moved over from your portion vested that was the amount from the first of august but it's not the maximum it's it's the higher minimums so so for instance a use a good example if you have a hundred and fifty thousand rand retirement in your bought on the vested portion the first of september you can have fifteen thousand into that rand bought but if million rand you have a in your vested bought only have you can thirty thousand rand maximum purchased with a of or the minimum of ten percent thirty thousand rand alright so the initial contribution from the vested pot is capped thousand at thirty rand when you then move over these new to into these two new we're ports now in the two new post still have the third and we vested part which is the pot there what does it mean for those with existing retirement ports does the vested pot then can i then tap into vested pot every the single year and put percent or ten thirty thousand into my savings is or it a once off contribution from the vested pot it's a once off contribution future any contributions into your retirement planning happens after the first of september based on your contributions on your retirement or your pension fund or provident as an existing member that has retirement a fund or that has an pension fund oreo a or whatever retirement benefits that been accumulating i've over the years and my forced to be part of the new system two pot camera elect to not be part of that k jimmy this is legislative requirements so just one step back remote applicable this is only to pension and provident funds retirement and not annuities retirement annuities this is that money that how your employer contribute or you contribute on the office with your employer retirement towards your so retirement annuities are excluded from this but so in a pension or provident you fund don't have a choice of the dislike you are part of process it's like your taxes paying you don't have a choice have to pay it you those that at their pension are looking and provident funds will not have any option but to be part of the new tax system or the new pot system two rather at let's look at the its implications of this so i've now got new i've got a vested pot that its own tax implications has two we've got a new pot system where one partner savings port is one my pension provident reinvested that will be in whatever manner so now contributions these towards two ports post first september are third a going into the savings pot if i'm understanding correctly and then two thirds contributions of my that then go into the second pot in this new to so that three that's growing now where it relates to withdraws entitled i'm as a holder of this to port system or the savings pot to make an annual withdraw one annual withdraw and that taxed how is okay so your annual withdraw on a minimum is of two thousand rand and you can that that tax on you are taxed what you call your marginal tax rate so it a higher tax rates are instance for it's normally it varies fifteen but up to to twenty percent it can be to fifteen or twenty percent up more you than what are taxed on the contributions added that you towards the port so dangerous it's a very play to go going to and say okay i'm use my saving spot emergency for an fund and withdraw that every year because your tax at a much higher rate what you than contribute towards did that part when they say that the tax deductions so you don't play if this right government is actually making money out of with you by utilising that that savings pot to to fund your lifestyle and not your retirement not look at steer let's funding the retirement side of old port system the as we understood a it had initial once off a lump sum withdrawal of about i think it was five hundred and fifty capped at thousand rand if i'm not mistaken upon retirement and that was of tax exempt and then the rest would then be placed into your living annuity or other whatever type of product that you purchase forward going under the new two pot system does that how change what pot happens to the vested upon retirement what happens to pot upon the savings retirement and my not taxed that still on in line with the marginal rates tax or does it all change as i as long reach retirement age okay so just take one step back one things is really important what a lot of people didn't think this is one of i the great thing about to port and some people don't like it but in terms of retirement it's a brilliant thing that government did here is because what a lot of people did they got is when into financial dire straits or move jobs they they would accumulate debt a lot of then quit their job take out their pension or provident fund thank you out of that withdraw that and by that tax it and then on and they start from and scratch they start building up the retirement you can't now do that anymore so when you when you start in your you when you quit job or you exit to a company prior fifty-five you have to that money or invested and and you that have to go in process of of investing your money that's the first so thing to keep in mind the second thing is that prior to to the two pot system get coming in you can to a one third portion on your funds on you can withdraw that besides the let's call it the older dislike slightest provident fund requirements we had or laws so to one up third the first five fifty rightfully so you can have portion as a tax free and then almost told till about one point want one five five million u u or paid on a sliding scale tax to twenty-seven up percent anything above the one five one point five million you were taxed thirty six percent at so that's why a lot of people don't take that withdraw the on that total one third portion but they and limited then the rest of buy a the money you living or a life annuity with now the d two thirds portion is exactly the same now the one third bosch you can can actually tiger at it time want as you many times as you want to europe want to the maximum third or the one portion which is not advisable essence because in it means if you target your retirement to have a thirty thousand rand tax sorry thirty oh thousand rand income because taking of you your money every year you actually reducing your future earnings and you ongoing twenty thousand rand a month decide okay what not going to pay am i into retirement now you get when to the retirement portion once reach your fifty-five you that time that portion one third that you can actually withdraw take the want out of it and not highest by the tax the marginal after tax but that's only retirement now what's also important is can go and you say okay transfer i want to money from my saving sport retirement to my bought which is my living annuity life annuity and bought you can do that at any stage however you're not allowed to reverse it right stephan can you make additional contributions towards these ports over and above your contributions regular and specifically designate how so let's they are split say for example contribute three thousand rand a month of thousand rand part one two goes into thousand doesn't report to then win and bonus season comes to top around i want up my savings additional five pot with an thousand is that possible so done proportion it's towards your retirement because as a it's seen still seen as one nation one alright it's so it still will be split and apportioned between the two regardless what of i would like as because it still viewed one retirement contribution alright we'll that thanks leave it so much for those insights this provides hopefully but more clarity around how to navigate the two pot retirement system that's the end of it who is executive financial head for planning at nmg benefits i'm i'm