Two-pot system: South Africans warned against dipping into retirement funds
FNB says taking money out of your retirement savings can slow down the growth compound of your returns.
JOHANNESBURG - Banks are warning retirement fund members against accessing their savings early from their pension funds.
In June, President Cyril Ramaphosa signed the two-pot retirement system into law.
It splits all retirement fund contributions into two parts: a savings pot and a retirement pot.
FNB is the latest bank to join the chorus of warnings for South Africa, saying members should think carefully about the potential impact that accessing savings early could have.
While it may be tempting to take money out of your retirement funds, some banks are warning against this.
The system comes into effect next month. People are allowed to withdraw 10% of their retirement contributions capped at R30,000 once a year.
Given the difficult economic environment, banks and investment institutions have cautioned people against treating their pension funds as a savings account.
FNB says taking money out of your retirement savings can slow down the growth compound of your returns.
According to the bank’s latest retirement insights survey, less than 10% of South Africans retire comfortably.
It says one must weigh the short-term against the potential long-term hardships of withdrawing from retirement funds.