Back in 2023 some very smart person thought it would be a good idea to allow retirement fund members early access to their pension by splitting the retirement pot into 2 chunks. Obviously not such a great idea knowing the majority of people are lacking any type of basic education let alone financial knowledge. The idea was allowing half of the pension available early for financial emergencies and not for supplementing their living expenses.
The two pot pension retirement system went live on the 1st September 2024 so this has been roughly 3 weeks short of 1 year currently. One does not have to be a genius to see what many members have done as they seriously do not understand taking half now will reduce what they have when they really need it at retirement age.
In the 11 months this two pot system has been live R57 billion has already been withdrawn and more worryingly this is by the lower income earners. What the data reveals is those withdrawing their pensions are those earning between R5K and R10K between the ages of 35-40. Half the withdrawals are being used to pay off debt,20% school fees and the balance paying mortgage and bond payments.
They are now discussing educating people with regard to financial literacy, but that boat has already sailed and should have been done before the two pot system went live. This is a disaster created by those in leadership roles and they have screwed their people over.
I know a few people who have already touched their pensions and wondered how this was even possible and now I know. The one poor guy lost half his pension when his wife demanded this in the divorce settlement. I am not sure this is even legal, but the transaction has already been done and know this is a legitimate thing that happened. This is utter madness and just glad I do not have to be in their shoes when they hit 65 or whatever the retirement age is by then.
Anyone with any common sense would know this would be abused in the wrong way as the people can barely write and read let alone understand the long term implications. This is all about living now and no concern for the future where as we are concerned about the future and make our finances work for now. Opposite thinking going on here or no thinking through ignorance more like it as this is nuts.
The stats also reveal that over 4 million accounts have withdrawn funds with nearly 1 million being repeat withdrawals. I can recall reading somewhere that South Africa has roughly 25 million workers paying some form of tax so 4 million accounts or 17% are diluting their pensions. This will only increase as this was only the first 11 months and many more will turn to this new found money supply.
I have never heard of a more stupid system in my life and through government being so reckless with their citizens futures for even letting this bad idea become a real thing. The scary part is this would be someone higher up who is in charge of the government pensions. I keep saying this that people are in positions that they should never be in and many of them would be unemployable and I am not joking. I am still a little stunned at what is going on and it makes sense why some people have been spending like they have been boosting the economy (retail), but this is all false.
The one catch is the early pot is tax free along with it's growth until you make a withdrawal and then it becomes taxable. You wonder if this has been done on purpose allowing this to happen because the government has a shrinking tax revenue of R17 billion last year and an expected shortage of R81 billion this year.