Is the two-pot system the answer to retirement woes?

The contentious two-pot retirement system kicks into gear on Sunday, 1 September – but whether it will leave workers or retirees full of the joys of spring remains to be seen.

Will it give the economy a boost and help South Africans to preserve their retirement savings, or will it lead to notable withdrawals that can hurt the liquidity and depth of local capital markets?

More extreme views – often from unionists – are that the scheme is an evil way to keep workers from their hard-earned money and to allow the South African Revenue Service (Sars) to boost its tax revenues at the same time.

There is merit in all of the differing views.

The new system will stop people mortgaging their future through squandering retirement savings by withdrawing their full holdings every time they change jobs.

This has been one of the main reasons for the twopot system.

ALSO READ: Two-pot retirement system: what will it mean for South Africa’s economy?

It could also lead to people accessing money to help tide them over financially – although the R20 000 limit means that even this won’t be life-changing.

Sars, however, will gobble up its chunk, even from such comparatively modest amounts.

There is no doubt that if every employee on a pension scheme decided to cash in the R20 000, there will be a significant chunk of money injected into the economy – and that could be beneficial, at least in the short term.

But the whole point of the two-pot system is to force South Africans into a “rainy day” mentality and make them save.

While it is true that many families barely get by and cannot put much aside, it is equally true that many of us squander money and live beyond our means.

The new scheme means simply: take care of yourself in your old age and don’t expect society to do so.

ALSO READ: Storm in a two-pot