Don’t squander two-pot windfall

The two-pot retirement funding system proved two things about South Africans; they live in the here and now when it comes to money and they need education in personal finance.

When it became apparent that retirement fund members could withdraw a portion of their pension savings, there was a tsunami of applications.

What did you spend the money on?

Undoubtedly, there were those who needed access to the cash to be able to survive but also there would have been many greedy people who wanted the instant gratification of money in their accounts, rather than leaving it for the proverbial rainy day.

Then there were the many applicants who didn’t pay attention to the fact that the payments were anything but a windfall because the SA Revenue Service (Sars) was waiting to tax not only the withdrawals themselves but also to use the retirement savings to settle outstanding tax debt.

ALSO READ: Two-pot retirement system: People taken aback by amount of tax – survey

Sadly, the “we wuz robbed” complaints cut no ice with the tax authorities, and probably not with those who took the time to understand the two-pot system and who listened to proper financial advice.

In the longer term, the new system will ensure that people do not squander their retirement savings – and that is a good thing all round.

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