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South African rands.
PSG Financial Services has warned South Africans against withdrawing money from their retirement funds, saying it could have serious long-term financial consequences.
The warning comes as National Treasury plans to open discussions later this year on allowing limited access to retirement savings under the two-pot system in cases of financial distress.
The proposal has sparked debate about the potential impact on South Africa’s retirement system.
Head of Public Policy and Regulatory Affairs at PSG Financial Services, Ronald King, says early withdrawals may create more problems in the future.
“It’s understood that most South Africans have debt and I can understand the need to find a solution but the problem that you have is that you are trying to solve a short term problem by creating a much bigger long term problem,” said King.
He added, “If you withdraw R1 out of your retirement fund you’re withdrawing R6 out of your future savings. So, you’re actually exacerbating the problem six fold when withdrawing that money now. A third of the money will be going to the tax man. People pay off their debts but within three months they generate more debt and now have created a new problem for retirement.”
Withdrawals from the two-pot retirement system a boost to households
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