The two-pot system will come into effect on 1 September. Atleha-edu and the ASISA Foundation worked hard to educate and prepare role players for this momentous change. This article about their collaborative effort appeared on Linkedin.
Collaborative effort aims to demystify the two-pot retirement system for retirement fund members
On 1 September the two-pot retirement system will come into effect, provided all legislative changes have been officially made by then. This system was designed to allow South Africans to make partial withdrawals from their retirement funds for emergencies before retirement, while the rest of the funds can only be accessed at retirement.
Retirement fund administrators have already begun efforts to explain the two-pot system to their members. The ASISA Foundation, through its Retirement Fund Trustee Education (RFTE) programme, supported by implementing partners Atleha-Edu and the ASISA Academy, has been developing educational content on the two-pot system since last year. This initiative focuses specifically on employee-appointed trustees in organised labour, shop stewards, and members of these funds.
“We are providing support through workshops for predominantly organised labour trustees, workshops for fund members such as labour shop stewards, and educational content and tools to simplify what is quite a technical development,” says Adrian Bertrand, co-founder of Six Capitals ESG Advisory, part of the Alternative Prosperity Group and practice head for Atleha-Edu.
Atleha-Edu content is distributed during and after the two-pot workshops to support participants beyond the initial session. “We develop content, including forthcoming simplified videos and a handbook for fund members, to help trustees explain in simple terms how the two-pot system will work.” These resources are all freely accessible on the Atleha-Edu and the ASISA Foundation websites.
What are the key issues?
Understanding the two-pot system can be challenging, but it’s crucial for members of retirement funds, particularly in industries like manufacturing, mining, construction, and government, to comprehend its implications and how the process will work in practice.
“The main issue is that people are unaware of how the two-pot system will work. There are many aspects to consider, such as the payment process and tax implications. Some members’ tax affairs are not in order up to the date of withdrawal of the savings pot, which could result in additional tax deductions. Understanding the mechanics is crucial, and that’s where most of the uncertainty lies,” explains Adrian.
“It’s important for members to understand that the two-pot system involves borrowing from your future retirement fund savings. While you benefit now, you’re negatively impacting your quality of retirement. We want people to understand the rationale behind saving for retirement as a long-term investment commitment,” he says.
“Conceptually, we’ve been communicating that it’s best to leave the money where it is because retirement fund investing is for retirement, not for today’s consumption. However, we do recognise that many South Africans face unforeseen emergencies further challenged by being overindebted and for many, the savings pot is seen as a lifesaver.”
What is being done to educate trustees and members of retirement funds?
The Atleha-edu team, with expertise from ASISA’s policy advisors, the ASISA Academy and funding from the ASISA Foundation, initially published a detailed digital publication simplifying the two-pot system, followed by articles aimed at the trustee.
“These publications were primarily focused on organised labour trustees of retirement funds and shop stewards, who are not financial experts but are trustees due to their leadership roles in unions,” explains Adrian.
While this effort will help trustees to explain the two-pot system to their fund members, Atleha-Edu’s focus will now shift to creating educational content specifically for members to simplify the two-pot even further.
“Atleha-edu is working with a specific union retirement fund to create a well-illustrated and simplified communication piece aimed at their members. They acknowledge the message’s importance and have agreed to let us create a handbook for the wider industry,” Adrian explains.
Explaining the two-pot system to retirement fund trustees has recently been a key part of the RFTE programme’s content. Some of the programme’s current themes such as investments, risk management, governance and ethics, and more are all critically important. However, the two-pot system will directly impact members, making it necessary to develop additional member-focused content to support trustees and fund boards in simplifying communications about its impact.
“We realise that not everyone will understand all the details of the two-pot system, but our goal is to empower trustees with the right information to explain to their members and provide resources for members to refer a colleague or a family member to. It’s all about increasing awareness so that members can make informed decisions about whether or not to access the savings pot on 1 September 2024,” Adrian concludes.
- If you want to be part of the success of the RFTE programme, send an email to programme manager Namarsha Singh at nsingh@asisa.org.za.
- Contribute, support or find out more about the ASISA Foundation’s programmes here or send an email to info@asisafoundation.org.za.
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