The implementation of the Two-Pot Retirement System has significantly changed how retirement savings are managed. Here are some of the most frequently asked questions to help you understand this new system in more detail:

 

How do I withdraw from my savings component

To obtain a savings withdrawal benefit, a withdrawal benefit form will be made available by Prescient Fund Administration ("PFA"). This must be completed and emailed to the relevant mailbox (ebadmin@prescient.co.za for umbrella funds or retirement@prescient.co.za for preservation and retirement annuity funds).

PFA will apply for a tax directive and thereafter will pay the savings withdrawal benefit into the member’s bank account on record.

This process, if there are no delays in obtaining a SARS tax directive, will take up to 10 days.

Unfortunately, the ability to request a savings withdrawal is not available via the Prescient Online portal.

 

How often can I withdraw from my savings component?

You are allowed to take out one savings withdrawal up to the maximum amount in your savings component every tax year ending 28 February 2024.

Note a savings withdrawal is not compulsory, in fact we encourage members to rather save for their retirement.

 

How much tax will be deducted?

Your savings withdrawal benefit will be taxed at your marginal tax rate, which means the money is treated as “gross” income and is taxed at the same rate at which your salary is taxed. Important to note is that this is probably a higher tax rate than what applies at retirement to lump-sum amounts. No retirement rates, allowable deductions, exemptions or tax-free amounts will be used in the tax calculation.

SARS will issue a tax directive in terms of which tax at the marginal tax must be deducted, together with any penalties or outstanding tax that may be due to SARS before your savings withdrawal benefit can be paid to you.

There is a savings withdrawal calculator available on the SARS eFiling website to assist with calculations.

 

Why has my retirement fund benefit been split on the statement?

This is to accommodate the various components that must be established to cater for the Two-Pot Retirement System implementation.

 

What will my statement look like?

Your Prescient Retirement Fund statement will now show up to four components. An example is set out below:

 

 

What do each of the components mean?

There are three components in the new system: Vested, Savings and Retirement Components.

The Vested Component (all retirement savings pre 1 September 2024 less the Savings Component seeding amount) is split out as follows:

Pre 1 March 2021: If you have any vested rights due to being a member of a provident or provident preservation fund on 1 March 2021, those rights will remain protected, and the related benefits will fall within this component.

Post 1 March 2021: all contributions made post 1 March 2021 but before September 2024.

 

The two new components where your contributions post 1 September 2024 are invested into is as follows:

Post 1 September 2024 (Savings): Initial seeding of up to R30 000 and one-third of all contributions post 1 September 2024 plus transfers of any Savings Component into the fund.

Post 1 September 2024 (Retirement): Two-thirds of all contributions post 1 September 2024 plus transfers of any Retirement Component into the Fund.

 

Prescient sends quarterly statements which will show the components as set out above. You can also register on the Prescient Secure Portal (https://www.prescientonline.co.za/) where you can view the amount invested in your different components at any time.

This new system aims to balance flexibility and security, helping individuals manage their retirement savings more effectively. If you have more questions or need personalised advice, it’s best to consult with a financial advisor.

I hope this provides further clarity on the Two-Pot Retirement System! If you have any more administrative questions or need further details, please contact retirement@prescient.co.za.