New 2-pot withdrawal wave

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Now the new financial year has started, pension fund members can again withdraw from the savings pot of their retirement savings under the two-pot retirement system. But fund managers warn that this might not be the best idea if you are short of cash.

The two-pot retirement system was implemented on 1 September last year and gives South Africans the option to withdraw from their savings pots once per tax year.

However, while this newfound accessibility may seem like a lifeline, financial experts warn that dipping into your retirement savings too soon could lead to financial hardship down the line.

"The ability to access a portion of your retirement savings should not be seen as a quick fix for financial challenges," said Lizl Budhram, head of advice at Old Mutual Personal Finance.

"Withdrawing now may ease short-term pressures, but it can significantly reduce the funds available when you need them most: when you retire.

"In addition, any amount you withdraw will be taxed as income, which means you will get out less than you expect."

The two-pot retirement system allows pension fund members to withdraw from their savings pots only once per tax year, with a minimum withdrawal of R2 000.