Mass withdrawals expected with two-pot pension
Old Mutual expects one million of its clients to withdraw up to R25 000 each from their pension savings when the new two-pot retirement system comes into effect next year, reports Fin24.
Michelle Acton, retirement reform executive at Old Mutual, says the group anticipates more than one million members within all the Old Mutual retirement funds coming forward to claim.
‘We have done market testing and when speaking to members, the majority of middle and lower-income members confirmed they would come forward and claim,’ says Acton.
Millions of households are finding themselves with their backs against the wall, battling to make ends meet amid soaring inflation, higher interest rates and an economy on the brink of recession.
They are expected to take advantage of new regulations to cash in when the current 1 March 2024 deadline arrives for the new two-pot system.
The new system means South Africans will be able to access one-third of their retirement savings throughout their career, while two-thirds will only become accessible on retirement.
The reform is meant to deter South Africans from cashing out their retirement savings when they resign, and also aimed at preventing workers from resigning to access their retirement funds.
Allan Gray director Richard Carter expects many South Africans will go for this option.
Carter does not expect the mass withdrawals will cause a liquidity problem as they will most probably amount to less than 1% of total pension fund assets in SA.
Up to 90% of people probably have pension balances of less than R250 000, with an average of around R75 000 – this is because most people tend to cash in pensions every time they leave a job.
Currently, the biggest concern for fund managers is the ability to get all their systems ready in time for next year's tight deadline, with the industry expecting to work overtime to do this.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.