THE TWO-POT SYSTEM UNDER DEFINED CONTRIBUTION(DC) FUNDS
The two-pot retirement system is a reform that will allow retirement fund members to make partial withdrawals from their retirement funds before retirement. DC retirement fund members can annually access a portion of their savings.
A fund member’s account will consist of three estimated components: vested, savings, and retirement.
The vested component (Pre- two pot system) will hold savings accrued until the two-pot system’s implementation on 1 September 2024.
Starting 1 September, one-third of contributions will go into the savings component, which will also receive a lump sum (seed capital) from the vested component – 10% of the member’s fund value on 31 August, capped at R30 000.
The remaining two-thirds will go into the retirement component, which must be preserved until retirement and used to purchase an annuity.
Members can make one withdrawal a tax year from the savings component, with a minimum withdrawal of R2 000. Withdrawals will be taxed at the individual’s marginal rate.
At retirement age of 60 Years, any remaining balance in the savings component will be available as a cash lump sum or can be transferred to the retirement component and used to purchase an annuity.
MCPF rules were registered on 28 July 1989 taking into account the Pension Fund Act. Members are encouraged to familiarise themselves with the MCPF rules as these rules give direction to all decisions taken by the Board.
The MCPF Board is continuously looking at way to improve member benefits whilst keeping in line with the Rules and welcome all suggestions from members may
Contributions are made in accordance with the Remuneration of Public Office Bearers Act No.20 of 1998 and subsequent Government Notices that get issued in this regard from
time to time.
| Contributions | |||||
| Member | = 13.75% | ||||
| Council | = 15.00% | ||||
| Total | = 28.75% | ||||
| Member’s share account (fund credit) is completetd as follows | |||||
| a. | Own contributions | 13.75% | |||
| b. | Portion of council’s contributions *Minus risk benefits and costs Allocation to member |
15.00% – 6.00% 9.00% |
9.00% | ||
| c. | Plus interest and investment returns Total Fund Credit | 22.75% _ x.xx _ x.xx ====== |
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| All Benefits are taxable | |||||
