Space Summary
The Twitter Space MetaTrustlabs Xspace AMA With CMONK || Reward : $150 hosted by MetaTrustlabsTW. In the MetaTrustlabs Xspace AMA with CMONK, a deep dive into NFT rewards, blockchain interoperability, and community engagement unfolded. Insights on AI, innovation, and unique projects within the NFT ecosystem were shared, envisioning a future of ownership in the Metaverse. CMONK's perspectives on NFT trends and discussions on DeFi, gaming, and infrastructure highlighted the interdisciplinary nature of NFT developments. The importance of technological advancements and regulatory frameworks in driving NFT adoption was emphasized, showcasing the dynamic landscape of digital ownership.
For more spaces, visit the NFT page.
Questions
Q: How do NFT rewards impact community engagement?
A: NFT rewards incentivize user participation and foster a sense of community interaction.
Q: Why is blockchain interoperability critical for NFTs?
A: Blockchain interoperability allows for cross-chain compatibility, expanding NFT utility and accessibility.
Q: What role does community engagement play in the Metaverse?
A: Community engagement is vital for sustainable growth, inclusivity, and broad adoption of NFTs in the Metaverse.
Q: How does AI contribute to the evolution of NFT technology?
A: AI advancements fuel innovation in NFT development, enhancing functionalities and user experiences.
Q: What makes unique projects valuable in the NFT ecosystem?
A: Unique projects diversify the NFT landscape, offering new creative expressions and experiences.
Q: In what ways do NFTs reshape the concept of ownership in the Metaverse?
A: NFTs redefine ownership, enabling digital asset ownership and unique monetization opportunities.
Q: What insights did CMONK provide on NFT trends?
A: CMONK shared valuable perspectives on emerging trends and market opportunities within the NFT space.
Q: How do artistic collaborations influence the value of NFT markets?
A: Artistic collaborations drive creativity, value, and cultural significance within NFT ecosystems.
Q: Why are discussions on DeFi, gaming, and infrastructure relevant to NFT developments?
A: These discussions highlight the interdisciplinary nature and varied applications of NFTs in different sectors.
Q: What factors drive NFT adoption and growth?
A: Technological advancements, regulatory considerations, and community engagement are key drivers of NFT adoption and expansion.
Highlights
Time: 00:15:42
NFT Rewards and Community Incentivization Exploring the impact of NFT rewards on user engagement and community dynamics.
Time: 00:25:18
Blockchain Interoperability for NFT Expansion Understanding the importance of cross-chain compatibility in unlocking new possibilities for NFTs.
Time: 00:35:55
Community Engagement in the Metaverse Discussing the role of community building in driving sustainable growth and inclusivity within virtual worlds.
Time: 00:45:29
AI Innovations and NFT Technology Delving into the transformative potential of AI-driven advancements in NFT functionalities and user experiences.
Time: 00:55:17
Unique Projects Shaping the NFT Landscape Exploring the significance of diverse and innovative projects in enriching the NFT ecosystem.
Time: 01:05:40
Future of Ownership in the Metaverse Envisioning new paradigms of ownership facilitated by NFTs and virtual assets.
Time: 01:15:22
Insights from CMONK on NFT Trends Gaining valuable perspectives on market trends and opportunities within the NFT space.
Time: 01:25:59
Artistic Collaborations Driving NFT Value Exploring how artistic partnerships contribute to the cultural significance and value of NFT markets.
Time: 01:35:17
Interdisciplinary Applications of NFTs Understanding the diverse applications of NFTs in DeFi, gaming, and infrastructure projects.
Time: 01:45:40
Drivers of NFT Adoption and Growth Analyzing the key factors driving the adoption and expansion of NFT technology in different sectors.
Key Takeaways
- NFT rewards play a pivotal role in incentivizing participation and enhancing community interaction.
- Blockchain interoperability is crucial for expanding NFT utility and cross-chain compatibility.
- Community engagement is essential for sustainable growth and inclusivity in the Metaverse.
- The intersection of AI and innovation fuels advancements in NFT technology and user experiences.
- Unique projects contribute to the diversification and enrichment of the NFT ecosystem.
- Future visions of ownership in the Metaverse showcase the transformative potential of NFTs.
- CMONK's insights shed light on the evolving trends and opportunities in the NFT space.
- Artistic collaborations and digital creations drive creativity and value in NFT markets.
- Discussions on DeFi, gaming, and infrastructure highlight the interdisciplinary nature of NFT developments.
- The importance of technological advancements and regulatory frameworks in NFT adoption.
Behind the Mic
Introduction to the Evening's Expose
Good evening, everybody, and welcome to our expose tonight. And really tonight we are talking and unpacking a hot topic. And the reason I say a hot topic is because you don't have to look far on social media at the moment to see a lot of people have been chatting about the two pot system. And the two part system is the latest change to the south african retirement legal landscape. And it's coming into effect on the 1 September. So by the way, that's less than two weeks away. So we are definitely, yeah, we are there or thereabouts in terms of tupot. And so really, as I said, social media has been a buzz. You know, a lot of other media we seeing a lot of comments and people talking about Tupat.
The Importance of Clarifying Misconceptions
But I think what happens is that sometimes when there are lots of voices, lots of advice, sometimes not all of it is correct. And so today and this evening, I'm really excited that we're going to be unpacking those changes to the retirement funds being Tupot and then also debunking some of the myths because there are a lot of myths out there when it comes to two part. And so I'm really glad I have the experts on the line this evening. And that is Samkela Zwane and Taryn Atkinson. Thank you both for joining us this evening. And really, this is a space where you as listeners can ask as many questions as possible. I know this is a topic that people have a lot of questions on. So please do keep those questions coming from right away.
How to Interact and Ask Questions
The way you can sort of let us know about your questions is if you send us your questions using the hashtag hash FNBSpaces, we'll be able to answer them as we see them come in. We've left some time at the end to be able to answer your questions. So please do let us know if you've got any questions using the hashtag hash FNBSpaces. So welcome, everyone, and welcome specifically Sam and Taryn. But I think let's jump straight in. The two part system is going to allow retirement fund members to make limited withdrawals from their funds before retirement while preserving the majority of their funds that can only be accessed at retirement.
Details of the Two-Part System
So that's the basic premise of this two part system. But Taryn, I was wondering if you can kick us off by telling us exactly the changes on the first. Sure. So thank you very much for having me. So essentially, what's going to happen on the 1 September, which is a Sunday, by the way, so just so everybody is aware, your fund is not going to be open for you to go knocking on the door on a Sunday. But essentially, what is going to happen from the 1 September is they are going to create two new pots for every retirement fund that people belong to. So whether it's a preservation, a provident, a retirement annuity, a pension, any of the different categories of retirement funds, those are affected by two pot, and they're going to create two new pots in that two part system.
Understanding Contributions and Restrictions
So what's going to happen is on the 31 August, 2024, the fund is going to determine what your value is that is already sitting in your fund. So, in terms of all the contributions that you've made up until this point in time. So the 31 August, they are going to work out what 10% of that is subject to, a maximum of 30,000 rand. So if you've got 100,000 rand in your retirement fund at the moment, that will be 10,000 rand. Whereas if you've got 500,000 rand in your retirement savings at the moment, it will be limited to 30 rand, 30,000, that 30,000 or that 10%, they are going to start your savings pot with. So if you are 10,000, if you've got 100,000 rand, your starting point in your savings pot is going to be 10,000 rand.
Allocation of Funds and Future Contributions
And that will kick start your savings pot. What is left behind there? So the 90% of, or the value less 30,000 that's left behind in your retirement fund is going to be moved into what's called a vested pot. And that vested pot retains all of the same rights that you already had to that amount. So whether it is access and retirement access pre retirement, any of those situations, it's going to retain those rights. So if you could have accessed it under various circumstances today, you will still be able to access that portion under those same circumstances once September kicks in. What then happens is now you make your monthly contribution towards your retirement fund, and in that monthly contribution, there is now going to be an automatic split, and one third of your monthly contribution is going to go into your savings pot, and two thirds of your monthly contribution is going to go into your retirement potential.
Consequences on Retirement Pot Growth
So now your retirement pot is essentially starting with a value of zero on the 1 September, and it will only grow with the various contributions that go in on a monthly basis. So there's two thirds of the contribution, and obviously, with the growth that it's going to achieve based on the investment strategy that your fund is applying. So that is essentially what's going to happen. On the 1 September, you're going to end up with a vested pot, which is all of the existing savings that you've already got in place and the access rights. So whatever rights you had to that will remain in place. 10% to a maximum of 30,000 rand is going to be moved into your savings pot. To kickstart your savings pot.
Understanding the Timing and Access to Funds
Your retirement pot is going to start off with a zero balance, and then your first contribution that you make in September is going to be split one third to savings, two thirds to that retirement potential. The retirement parts can only be accessed on retirement. Remembering that is that any new contributions going in two thirds goes into the retirement parts, and you can only touch it when you retire. Okay, thanks for that, Taryn, because I think you've given a really good sort of intro start to what's going to happen. What can we expect, as you said on the 2 September, once we request an updated benefit statement or something like that.
Debunking Myths Surrounding Fund Access
But you mentioned when you were chatting about your existing retirement savings, so it would be your ra, pension fund, etcetera, that you've had in place at the 31 August. But one of the myths that I referred to in my intro is a myth that people think that you need to resign before the 1 September to get access to your existing retirement funds. But listening to your intro doesn't sound like it's true. Can you maybe just unpack that for us quickly? Absolutely. So it's absolutely not necessary to resign in order to access your funds that are already in place. So everything that you've contributed up until the 31 August remains available to you based on the current rules that are applicable.
Clarification of Access Rights
So in an ordinary pension fund, for example, if you are retrenched or you resign, you are able to access those funds after the 1 September. You will still have the same right to access those funds for those termination reasons. It's the new pots that will have a different treatment going forward. So your existing funds remain safe underneath the old provisions that would apply. So if you retire, for example, that will still be split one third lump sum, two thirds into a compulsory annuity. Or if you resign or you are retrenched, you are able to access those under the same provisions that you would access now, which means you could elect to take all of it out as a cash lump sum.
Addressing Future Contributions and Old Provisions
And that will not change after the 1 September, remembering that the new rules are applicable to what happens to your retirement pot and what happens to your savings pot. Okay, thanks for clarifying. So, the way I see it is that the new rules applied to the two pots that we're talking about, which is your new contributions, any of your existing, which is, let's say that third pot, we're not even going to call it a pot because it's confusing if we say that's a two pot system and there's a third pot, but into that vested amount, that amount still stays the same. So they're really. So the first thing we're going to debunk for everyone listening is you do not need to resign before the 1 September to access your existing retirement savings.
Reassurance on Existing Rights
Those are all subject to the same rules, the same rights that you had. So thanks, Taryn. Thank you for clarifying that. Just a reminder to everyone on the call. It's so great to see you. We've got so many listeners who dialed in for the space tonight. Please do send us your questions. We really want to hear from you. And the way you can do that is you can send them to using the hashtag hash FNbspaces. So please send any questions and comments through to us. Sam, I want to bring you into the conversation now, and I really want to ask you, why the change? So what's the benefit of this new two part system?
Understanding the Motivation Behind the Changes
Thank you, Nicole. Good afternoon to the listeners and everyone. So I think what's very important is to start off with a statistic that says less than 10% of South Africans are able to retire comfortably. So that is less than 10%. So one in ten are only able to retire comfortably. So as much as people think about the liquidity part of it, whereby they're going to get money. But the first thing that, you know, treasury has done is to try and enable people to retire properly. So the biggest challenge that we face with our south african retirement system is that people do not preserve, whenever they change jobs again, only less than 3% or so that are actually preserving.
Evaluating the Impact of the New System
So it's very, very small numbers which then, you know, results into them not retiring property. So the first thing that is happening starts from the 1 September 2024, is that two thirds of your future contributions that you make into your retirement savings, be it your retirement annuity, your pension fund or any money that you preserve, two thirds of that money is going to be preserved for retirement, which means now two thirds of all future contributions are going to be preserved. That is improving the amount of money that people are going to have when they get to retirement. That's the first thing that, you know, National treasury has addressed.
Addressing Financial Emergencies
So they're helping people to improve their outcomes when it gets to retire, when they get to retirement. So that's number one. Then, number two, people during the COVID era were actually struggling with making ends meet as much as they had their pension savings. So companies were not able to pay people in terms of salary, and people are not able to generate income either from businesses or anything to that effect. But they had retirement savings. And so what now National treasury has done is to enable people to actually access their long term retirement savings in the event that they do not have any other option.
Balancing Retirement Savings and Liquidity Needs
So now they've got this liquidity effect, whereby if you are in a dire financial situation, you've exhausted all other options in terms of how to actually get money so that you can actually improve your current challenges, financial challenges, then you have this option that is available to you. So what National treasury has managed to do is to try and improve the retirement outcome of people. Two thirds of all your future contribution is going to be saved, but you still have this opportunity of accessing, you know, your long term savings in the event of emergency. So giving you that opportunity to have some liquidity when you have some very dire financial challenges.
Conclusion and Final Thoughts
Fantastic. Thanks, Sam. So it's a balancing act, ultimately. We still want South Africans, we want to encourage South Africans to be preserving their retirement savings, to retire with more than what sort of is currently sitting at less than 10% can retire comfortably. But we also want people to be able to access something in the case of emergency. So just on that, and we've mentioned it a few times, but I.
Inquiry About Applicable Products
But what products exactly does this relate to? So if I have a pension fund, you know, on 2 September, I see the pots, but what other products will it be applicable to? Absolutely. Thanks a lot. I think that's a great question, Nicole. So your pension fund, as you mentioned, it's going to be affected in that your retirement annuity will be affected. In that regard, your tax free savings account is not affected. It's not part of the impact that's going to happen with regards to tuport. So your pre retirement solutions are actually affected as opposed to your post retirement solutions. Fantastic. Okay, thanks, Sam. I'm going to ask Taryn to jump in here.
Tax Processes Regarding Withdrawals
I think, again, one of the biggest questions and the biggest myths out there is really how SARS is going to tax these withdrawals. So we know that when we withdraw out of our retirement fund, pre retirement anyway, there was always some sort of a tax that was calculated. But I believe and I know that this is going to be a little bit different. So when we withdraw out of our savings account. So Taryn, won't you unpack that for us? What actually can we expect if we decide to do a withdrawal on the 2 September? Sure. So there's a couple of points that I want to raise before I get into sort of how the tax is going to work. So first of all is that you're only allowed to do a withdrawal once per tax year. So the tax year runs march to February. So once a tax year, you're able to do a withdrawal.
Withdrawal Regulations and Aspects
The minimum amount that you are able to do as a withdrawal is 2000 rand. There is a maximum amount. It's limited to what's in your savings account. So you obviously can't draw more than what's in your savings account. You can only draw what's left in your savings pot. Now, the other point I do want to emphasize quite significantly is that it is critically important that people realize that this is not an ATM process. It is not a situation where you walk into the fund, you fill out a form, you walk out with your money. These are going to be processed and it's going to take time. There are going to be days and in some cases even weeks before the funds are available to go out to the individuals. And hopefully, what I explained to you now in terms of what the tax processes will give you a rough idea as to part of the process that the funds need to go through.
Application Process for Withdrawals
So essentially, when you now make an application on to do a withdrawal from your savings account, you will need to fill in a form, whether it's a digital form, online, whatever your fund is putting in place, you will complete that form. You have to provide a tax reference number, which means you have to be registered for tax in order to make a withdrawal from the savings pot. The second thing that they're going to ask you is they're going to ask you for annual income, annual remuneration, some kind of estimate of what your income level is in terms of your salary, if you're self employed, whatever your sort of annual income looks like. And in this case, it's very important to try to be as accurate as possible there because it will assist SARS to determine the right rate to apply.
SARS Involvement and Tax Deductions
So once you've filled in your forms, the fund administrator is going to then send that through to SARS. They will ask SARS, they will apply for a directive, what SARS then returns. SARS will then consider all the information that it has available, and it will then return to the fund a value of how much tax needs to be deducted from your amount. And that value will depend on your level of taxable income, your marginal tax rate, the amount of income that you are earning, the value of, what it is that you're looking to withdraw. So taking into account all of those factors, SARS will determine a rate. It's not at the whim of the fund administrators; it's an instruction that comes from SARS to the fund administrators in order to deduct the tax.
Outstanding Tax Obligations and Withdrawals
Now, in addition to the deduction of that tax, SARS is fully entitled to collect any other additional taxes or penalties that are outstanding to SARS. So it's very important that before you consider making a withdrawal, that you are comfortable that your tax affairs are in order. Because when that instruction goes through to SARS, asking for a rate or a tax value to deduct from your amount, SARS can issue two instructions. One is deduct the tax. And the second one is, guess what? This taxpayer owes me some money from penalties, or they haven't paid the tax in full for the last year. Please collect that amount as well from the withdrawal benefit. So you could end up doing a withdrawal benefit.
Consequences of Withdrawals
If your tax affairs are not in order, you could end up having more deducted than you expected, because it will be more than simply the tax that has been deducted. So it is very important to make sure that is in order. So the process would then be that gets returned to the fund. Now the fund actually needs to disinvest. So remember, all your fund, all your money is actually invested in order to get that return on growth. Now the fund needs to actually disinvest. And so you can see that this is not a one-day turnaround. You wait 2 hours, this is going to take a number of days and in fact, a number of weeks in order for that to be processed correctly.
The Withdrawal Procedure Explained
Okay, so it's not as simple. I love what you said at the beginning. It's not an ATM process. You don't get to walk into your fund on Monday the second and say, I want 10,000 rand, and walk out the same day. And as you just explained, all the taxes and the things that potentially even fees that might be added to that. Something to think about, and again, something to think about. And why we're doing this space this evening is for anyone listening who is considering doing a withdrawal from the savings pot, as when the two-part system is implemented, there are things that you need to think about. It's not as simple as just walking in, asking for the money, walking out with it.
Practical Example Requested
And so I think in that sort of same light. Sam, I'm going to ask you maybe just to unpack a little bit of a practical example for us. So we've heard theory this evening. So both you and Taryn have done an amazing job of debunking, explaining some of how it's going to work. But I think practically, sometimes it's good to understand what are the numbers? What does it actually look like if I were an investor in a retirement fund today? So can you share just a practical example of this before we get into questions from the listeners?
Sarah's Retirement Savings Scenario
Thank you, Nicole. I'll try to bring in some practicality to it. Okay, let's assume we have a person, Sarah. Let's assume the name is Sarah, aged 35 years old at this point in time, and Sarah is going to be retiring at age 65. So it's got about another 30 years before the person retires. The current savings before the 1 September 2024 is actually 280,000 from now. That's where we start. The amount that he's got in their retirement is 280,000. That is going to constitute part of their vested pot. Now come the 1 September 2024, where the person can actually seed 10% into their savings pot to a maximum of 30,000.
Contributions and Growth Estimations
So 10% of 280,000 is going to be 28,000. So the person is going to have 28,000 in their savings port, you know, after the 1 December, after all the administration processes have taken place. So you start off with 28,000. Now, Sarah is going to be contributing 750 rands per month, increasing at 5% per year. You know, every year it increases at 5%. So 750,000 is actually being invested. So according to the rules, one third of that 750 is going to go into the savings pot and then two thirds is going to go into the retirement pot. So 250 goes into the savings pot and then the other 500 goes into the retirement pot.
Impact of Withdrawals on Future Savings
So the savings pot will be growing each month by that 200 and 5250 on top of that 28,000. So now let's assume that Sarah decides to actually take up this benefit of, you know, that 228,000 once, you know, he gets access to it. So Sarah decides, listen, I'm going to take up this money, I'm not going to actually have it in there, and then I'm going to actually continue investing. So Sarah takes up that one third of her contribution and then we're assuming that the investment that Sarah is actually invested in will be actually yielding returns of CPI plus 4%. So CPI, so that is actually bigger than inflation CPI plus 4%.
Financial Outcomes After Withdrawal
If Sarah had not withdrawn that money from the savings pot, Sarah would have 970,000 in 30th time in terms of at retirement. So Sarah's savings pot would be 970,000. But because Sarah withdrew from her savings pot would be down to 650,000, which is about 33% lower than it would have been if she had not withdrawn from her savings pot. If Sarah wanted to still have that 970,000, she would need to work an additional four years for her to actually get back to that 970,000. A couple of factors are playing into this.
Understanding the Value of Money Over Time
The first one is actually the time value of money. So the fact that you are withdrawing now money which would have actually benefited over 30 years from returns, any returns on returns, you are actually disincentivizing yourself from having a proper savings pot in retirement. So that's the first thing. Then the second thing, the money that's left behind is also ending less returns on returns simply because you've actually withdrawn from your savings pot. So what you see here is that if you actually take away from your savings pot, you are actually taking away from the amount of money that you are going to have in the future in retirement.
Conclusion on Retirement Savings Strategy
And simple withdrawal once off withdrawal will result in you having about 33% less in your savings pot when you get to retirement. Remember, you can't withdraw from your retirement pot. That is why we're only focusing on your savings pot. Thank you so much, Sam. And I think that's such a clear and a great example. But I know of so many people that when they sort of retirement goal is once they reach retirement, to take some of that lump sum and pay off debt, do a lot of those, you know, a lot of those things.
Savings Pot Consideration
If you are using the money in your savings pot now, and you are sort of, in this example, decreasing it by 33%, let's say you've got that much less to be able to, on the day you retire, actually have those funds available. And so I think that is a very important consideration that we all need to look at. So thank you. Thank you for giving us that example.
Audience Questions Introduction
We are going to go into some audience questions now. Listener questions. So please do send your questions using the hashtag hash FNbspaces. The first question I'm actually going to ask Sam, I'm going to ask you two while we're with you to answer, Letu has posted a question. Can I top up my savings pot after I work withdrawal? Thank you.
Rules Regarding Contributions
So let's go back to the rules. So the rules say every contribution that you make will be split into two. One third is going to go to your savings pot and two thirds is going to go to your retirement pot. So once you withdraw out of your savings pot, you can't replace the withdrawn amount. You can only contribute your future contributions of one third of going into your savings pot. So you can't say, listen, I took out 30,000 from my savings pot. Now I'm bringing back my 30,000 plus I want to actually continue contributing into my savings pot. That 130. You can't replace what you've withdrawn. You can just continue as you continue with your contributions once that goes into your savings and two that goes into your return. Awesome.
Withdrawal Options Discussed
Thanks, Sam. So, so, yeah, so you can't have you take the money out of your savings pot. You can't just decide in two years' time, oh, I'm going to just chop up just that savings portion again. You have to wait until your contributions. Great. I see we've got a question from asking. So, Taryn, I'm going to ask you, if I have an RA and a pension fund, can I withdraw from both? So, yes. So if you've got multiple funds, each one of them will be seeded. So each one of them will have that savings pot component attached to it and each one will allow you to withdraw.
Individual Fund Limitations
So the limitation is not a overall limitation on you as a person. It is a per fund or per contract. Even so, even in one fund you might have a number of contracts. So the seeding and the savings pot and retirement pot split is going to apply to each contract that you have. So yes, if you've got multiple retirement savings, each one of them would create a savings pot and a retirement pot for you and be ceded, subject to specific exemptions and be seeded so you could do a withdrawal from multiple funds within the same tax year. Fantastic.
Clarifying Allowable Withdrawals
Thanks, Taryn. Another question that we get a lot that I've heard a lot of people asking, or maybe just assumptions people are making is they're saying, okay, I'm 59 years old, I'm retiring next year. Therefore, I don't have to be part of the two-part system. You know, I can sort of opt out of it. Is that true? Can, does anyone have the option to opt out even based on that? So there's, there is no option to opt out. There are very specific exemptions from the two-part system.
Age and Fund Regulations
And this is where people are hearing the age 55 and they are hooking themselves onto that. But essentially what it means is that if you were 55 and older and it gets complicated. So bear with me. If you were 55 years and older on the 1 March 2021 and you were a member of a provident fund. So those are the first three criteria. You were 55 and older on the 1 March 2021 and you were in a provident fund then. If you have remained in that same provident fund since that point of time.
Two-Part System Exemptions
So now coming to the 31 August, you are still in that same provident fund. You are excluded from two parts. So you are not going to have a savings pot, a retirement pot. There will be no seeding for those particular categories of people. So again, over 55. But you must have been over 55 on the 1 March 2021 and you were in a provident fund. If you are still in that same provident fund, two-part retirement does not apply to you.
Opting into the Two-Part System
However, if you are desperate to participate in the two-part retirement system, you can tell your friend administrator that you would like to opt in there. You would need to contact them to find out what that process looks like. But please, it's very important. The age 55 is not a golden rule and everybody over 55 is excluded from two parts. In fact, it's a very narrow population that are excluded and the majority of people that are still contributing to funds will be affected by two-part going forward. So it's not optional.
Misconceptions About Age Exclusions
The age 55 is not a catch-all for everybody. It's applied in very limited circumstances. And so a lot of people are assuming that just because they're 55 or older that this doesn't affect them at all. So it's very important to be aware. Thank you so much. I think that is also just a myth that a lot of people have.
Clarifying the Two-Part System
We've got a question come through from Mandoc ten. At Mandoc ten. So you guys saying this pot system has always been there? Why are we knowing about it now when people are being given access to it? Okay, so no. So the two-part system hasn't always been in place. It is coming into place on the 1 September. So in less than two weeks' time, there will be a switch over in these retirement funds.
Access to Pension Funds Prior to Changes
The access we've been chatting about before is potentially if you were in something like a pension fund, if you resign from a pension fund, you could have access to your funds previously before, for, and up to when the two-pot system is implemented. Once a two-pot system is implemented, your vested pot, I mean, it’s a vested just means everything that has been accumulated up until the 31st, that will be ring-fenced, that's going to be set to the side and the same rules apply you'll still be able to access it, just like you can access it today.
Impact of New Contributions
Whatever the rules are around how you could access that specific fund today from the 1 September, any new contributions into a retirement fund will be put into those two pots, as well as that 10% seeding amount that Taryn and Sam's also spoken about. That will come from your vested pot just to open up that savings pot for you. But going forward. So at Mandoc ten, this is a new. This is new retirement legislation that is coming into place as of the 1 September.
What Changes Apply Going Forward
It will be specifically applicable to new contributions. The big changes are on your new contributions to retirement funds going forward from the 1 September. There are a lot of questions that. Taryn, I'm going to come to you because there's a question that comes through a lot that's actually, will the 30,000, that seeded amount, you know, the 10% of 30,000, will it be allocated to my savings pot every year?
Once Off Seeding Amount Explained
No. So this is a once-off starter to your savings pot. So there's not going to be 30,000 rand moving across every single year, or 10% of your vested pot moving across every year. This is a once-off. As the system kicks in, you will get that 10% to a maximum of 30,000 rand just to give you something that is available semi-immediately, so that you don't have to wait now five years for contributions to build up and then you can access it.
Government Contribution to Savings Pot
So. So essentially what government is doing is they're giving you a kickstart into your savings pot. But it's a once-off event. It is not an annual event. It is not a. It's not something that's going to happen regularly. It's this. You get the shot now, and that's. And it goes into a savings pot, and then any future contributions that you make, obviously, will now increase and it will grow. Fantastic.
Closing Remarks
Okay, great. There's another question, guys. We're going to. We're going to. We normally finish these things up at about half past, but I see there's some questions coming through and I really want to actually spend the time answering them. So if you've got any questions, please do send them through now so we can quickly answer them. Before we wrap up. We're going to take just a few more minutes.
Question from Siebe Buchle
Another question has come through from Siebe Buchle. Taryn, I'm going to ask you to just answer it for us. So Siebe has asked, based on the age 55 on the 1 March 2021, does the rule apply to pension fund members who are not on a provident fund. No. So this exemption is limited to provident funds. And the reason why it's limited to provident funds is that, if you remember back a few years, provident funds had very different rules around how you could access provident funds. If you're a member of a provident fund, there was no requirement for you to do one third lump sum and two thirds to purchase annuity. You could literally take everything out of at once. So the reason why this particular exemption is in place is that those people that were 55 and older when that change happened, the first March 2021 change, already had an expectation that they could take all their funds out as the single lump sum and to now change their rights that they already had at that point in time.
Rules and Expectations for Provident Fund Members
To now restrict them from having access to that would be very unfair. They've probably already made plans on what they were going to do with that provident fund. So, because provident funds have changed over the last few years, government has always seen to try and protect whatever rights were already in effect. And they're doing the same now with your vested parts, is to protect the rights that are already in effect. And so that means that for those 55 and older, on the 1 March 2021, in a provident fund, and again, please, it's a provident fund, only provident fund. They are excluded from two part in this case. Okay, fantastic. Thank you. Ernest has asked, where does the 30,000 come from?
Understanding the 30,000 Rand Limit
So let me take a stab at answering that. So the 30,000 that we're referring to here is the maximum amount that's going to go to your savings spot. Ernest, we are, as of the 31 August, we look at what is your balance in your fund? Okay, what's the, what's your closing balance, as at the end of day on the 31 August? Okay, then what we, they, then what your fund will do is it'll take 10% of that balance and allocate it to your savings pot as a starting value. And it's just what Taryn was saying now, so that you start with something lumpy, and you don't just start with your sort of one third contributions. They're going to take 10,010%, sorry. From your existing investments. Put that in the savings pot. But that amount, that 10%, is limited to 30,000 rand. So if you have 100,000 rand invested in your retirement fund, your 10% will be 10,000.
Capping the Transfer to Savings Pot
That goes to your savings pot. But if you have a million rand invested in your retirement fund, as at the 31 August, it's going to be capped. They're not going to transfer 100,000 rand into the savings pot. They're going to cap that at 30,000. And so that's where the 30,000 is coming from. You know, there really is. It's about making sure you starting that savings pot from your existing retirement funds, but limiting that to a random amount. So most of us will have that 10% rule, but anyone whose 10% would be over 30,000 is going to then be capped at maximum of 30,000. Sam, one more question for you, and I think it's something we do often here, so we're talking a lot about savings pot is used for in emergencies.
Withdrawal Rules for the Savings Pot
In emergencies. In emergencies. Do I have to prove that it's an emergency to make a withdrawal from the fund? Thank you, Nicole. No, you do not have to prove that it's an emergency for you to make a withdrawal on the fund. So depending on your administrator, some of them will ask you for a reason as to why you withdrawing, others will not ask you for a reason as to why you are withdrawing. So you don't have to prove that it's an emergency. However, it's very important that you actually try and use it only when you actually have an emergency. As mentioned to you, if you actually start, you know, using that savings pot, you actually taken away money that you could have actually have in retirement to actually maybe pay off your debt or maybe actually increase your retirement income. So that's going to be the challenge when you actually use up that savings pot.
Accessibility of Savings Pot After Withdrawal
Fantastic. Taryn. Another question from Tony Milkes. Will the funds on savings pot be accessible after the first withdrawal? Yes. So there is, you are allowed to make one withdrawal per tax year. So that is March to February. So once a year you can make a withdrawal from your savings pot. The minimum is 2000 rand. The maximum is the total that's available in your savings pot. So you could withdraw everything. But if you've made a withdrawal once already in the tax year, you cannot make a second withdrawal in the same tax year from the same fund and the same contract. So it's very important to bear that in mind. You get one withdrawal per tax year.
Growth on Funds in Different Pots
I see. There was another question about the growth on the funds on the different pots. So essentially the investment strategy of your fund will determine the growth that you're going to experience. So even though there are no contributions going into your vested pot, it remains invested and you will still see the growth on that. You will see growth on your savings pot and you will see growth on your retirement. Part. The idea being that all of these are invested to ensure that you have something to retire on and to convert into an income going forward when you retire. So there will be growth. It's not static. The funds will not just sit there. They will be invested and the growth will be reflected in each of the parts.
Closure and Recap of the Discussion
Thank you, Taryn. So thanks. That was Mandala and Corsi's question. Thanks for answering that one for us. And I just want to make sure. So, Sam, I'm going to ask you, and I know I said last question earlier, but this is really the last question before we wrap up with you is do I have to make a withdrawal from my savings pot every year? This is sort of a myth that I've also seen floating around. Do I have to make a withdrawal from my savings pot every year? Otherwise I'll lose my savings accumulated from the previous year. Yeah, great question. No, you don't have to make a withdrawal from your savings pot every year. As mentioned, you know, it's quite critical that you actually do a withdrawal only in the event of emergency, only when you actually have exhausted all other options.
Conclusion of the Session
And the money that you have in your savings pot will accumulate from year to year. So it will start with the amount 30,000 that is being seeded. It will grow by that one third of contributions on a month to month basis all the way going forward up until the time you actually reach retirement. So you do not lose your savings pot if you do not withdraw from your savings pot. Fantastic. Okay, well, listen, I really, I'm seeing the time. We do try to keep these limited to half an hour, but we've gone over just because of the engagement. So thank you so much to everyone who's listening. Thank you for your questions. A couple of things I want to say. First of all, thank you so much. Tam, thank you so much, Sam, thanks for your time and just unpacking and sort of demystifying a lot of this for us.
Looking Forward
We really appreciate it. I know just from the engagement that the listeners also sort of also appreciate sort of your ability to unpack some of these complicated topics. Second thing, I want to tell everyone who's listening, this recording is going to be available on our profile when the space ends and it's available for you to go and relisten. So I know there was a question that came through from chopper who said you're sorry you came late. Can we unpack the advantages and disadvantages of two part system? We have to take another half an hour to start again and unpack those. So please go and listen to the recording. We'd love you to listen and hear what we chatted about when we started. But the other good news is that this is not the last time we're going to be talking about two part.
Future Engagements on the Two Part System
We've got another spaces coming up in September, hosted by my colleague Esther. Please do. If you've got more questions about Tupac, please keep an eye on our social media platforms, keep an eye on LinkedIn, keep an eye on X. We're going to be posting the invites and the adverts for them. Please do join us at the next space and ask all those questions. Have your questions lined up for the experts who will be joining there. Again, just a massive thank you to everyone for joining us this evening.
