Buzzapp Master From September 1, the majority of your existing retirement savings will be allocated to a vested pot, and the new rules will not apply to these savings.
Going forward, your retirement contributions will then be divided into two pots:
Savings pot: This pot is designed for short-term financial goals and emergencies. One-third of your future contributions will be allocated here, and you’ll be able to access a portion of these savings before retirement if necessary.Retirement pot: This pot is reserved for long-term retirement planning, ensuring that a portion of your savings are preserved until retirement age. Two-thirds of your future contributions will be allocated here.Previous pension division in divorcesBefore the implementation of the two-pot system, the division of retirement funds in divorce settlements was managed by considering the total value of the member’s retirement fund.
The Pension Funds Act — in conjunction with the Divorce Act and, where relevant, Islamic law — stipulates that a court granting a divorce decree may order the transfer of part, or all, of the pension interest of a member spouse to the non-member spouse.
Changes with the two-pot systemWhile the overall value of the retirement fund remains unchanged by the two-pot system, there are important procedural differences.
Specifically, retirement fund administrators must be notified when divorce proceedings are initiated to ensure that no payments are made from the savings pot during the legal process. This ensures that the division of assets is handled correctly according to the legal requirements.
Manyike says that, despite the procedural changes, the fundamental approach to dividing retirement funds in a divorce will remain the same. The total value of the retirement fund — encompassing the vested pot, the savings pot and the retirement pot — will still be considered in the division process.
Consulting a financial adviser to understand your individual circumstances under the new system is highly recommended. A financial adviser can provide guidance on navigating the procedural changes and ensure your financial interests are protected during divorce proceedings.
“While the two-pot system introduces some procedural adjustments, the essential process of dividing retirement funds in divorce settlements remains consistent. It is crucial for individuals to stay informed and seek professional advice to navigate these changes effectively,” says Manyike.
To get in touch with a financial adviser, visit the Old Mutual website or call 086-060-6060.
This article was sponsored by Old Mutual.
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