Uncategorized Archives - mCubed Group

Understanding the New Two-Pot System: What South Africans Need to Know

mCubed — Mon, 26 Aug 2024 12:51:38 +0000

The South African retirement landscape is undergoing a significant shift with the introduction of the two-pot system. This change, set to be implemented in the coming months, aims to provide greater flexibility and accessibility in managing retirement savings. However, navigating these changes requires careful consideration and planning. Here’s what you need to know to make the most of this new system:

1. Update Your Contact Details

First and foremost, ensure that your retirement fund has your correct contact information. This might seem like a small detail, but it’s crucial for receiving timely updates and communication regarding the new two-pot system. Accurate contact details will ensure you stay informed about any changes that could affect your retirement planning.

2. Stay Informed Through Your Retirement Fund Administrator

Keep an eye out for communication from your retirement fund administrator or the trustees of your fund. They are responsible for informing you about how the two-pot system will be implemented and what steps you may need to take. Being proactive in reading and understanding these communications will help you stay ahead of the game.

3. Consider Your Options Carefully

With the new system, you have more flexibility than ever before, but this flexibility comes with responsibility. Here’s what to consider:

– Identify Your Long-Term Savings Goals: Start by defining your long-term financial goals. Planning for your future is crucial, and understanding your goals will help you make informed decisions about your retirement savings. Try to save as much as you can when possible, and be prepared to adjust your plan as circumstances change.

– Seek Professional Advice: Given the complexities of the new system, it’s wise to consult an accredited financial advisor. They can help you navigate the changes, optimize your retirement plan, and ensure you’re making the best choices for your future.

– Provident Fund Members Over 55: If you are a provident fund member who was over the age of 55 on 1 March 2021, you have the option to Participate in the two-pot system. This could offer you additional benefits, however you need to consider how this option aligns with your retirement goals.

– Withdrawals from Seeding Capital: If you’ve been contributing to your retirement fund for several years, you might have access to withdraw from the seeding capital when the reform is implemented. While it might be tempting to make a withdrawal immediately, think carefully before doing so. Withdrawing early means you’ll forfeit the amount drawn plus any future interest it could have earned. Additionally, withdrawals from the savings component will attract less tax if you wait until retirement. Remember, the seeding capital is once off and only 10% up to a maximum of R 30 000 will be allocated to the savings pot.– Transfer Between Pots: Consider whether it might be more beneficial to transfer funds from your savings component to your retirement component. This decision should be based on your long-term financial needs and the tax implications of each option.

4. Avoid Pressure and Make Informed Decisions

Lastly, don’t let anyone pressure you into making decisions that aren’t in your best interest. It’s important to make informed choices based on your own financial situation and goals. While it’s commendable to assist others, remember that your retirement savings are the result of your hard work. The longer your savings remain invested, the better they can grow, so think carefully before making any withdrawals.

In Conclusion

The two-pot system represents a significant change in how South Africans will manage their retirement funds. By staying informed, updating your details, and seeking professional advice, you can make the most of these changes and secure a more stable financial future. Remember, planning and informed decision-making are key to maximizing the benefits of your retirement savings.

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2023 Budget Speech Highlights

mCubed — Tue, 14 Mar 2023 08:17:27 +0000

2023 Budget Speech Highlights

Key points:

9% adjustment to individual income tax brackets and rebates
Fuel and Road Accident Fund Levies remain unchanged
Sin tax to increase by 4.9%
25% tax rebate for individuals for the installation of rooftop solar panels, limited to R 15 000. This will only be available for 1 year and not applicable to batteries or inverters.
An expanded tax incentive for businesses of 125% of the cost of renewable energy assets used for electricity generation, brought into use during a period of 2 years from 1 March 2023.
10% increase on tax brackets to withdrawal and retirement lump sum benefits, with tax rates remaining unchanged
Diesel fuel levy refund will be extended to food manufacturers for a period of 2 years, from 1 April 2023 to 31 March 2025
Increase of the health promotion levy on beverages to 2.3 cents per gram of sugar is delayed until 1 April 2025.

Two-pot system proposal:

Phase 1 of the legislative amendments to the retirement system is set to take effect on 1 March 2024 once public consultation has been finalized. The aim is to allow members access to a portion of their retirement savings while the balance is left for retirement. More work is still needs to be done before the implementation is finalized.

Tax scales and benefits for 2023/2024 tax year of assessment:

Personal income tax

Taxable income	Tax Rate
R 0 – R 237,000	18%
R 237,001 – R 370 500	R 42,678 plus 26% of the amount exceeding R 237,100
R 370 501 – R 512 800	R 77,362 plus 31% of the amount exceeding R 370,500
R 512 801 – R 673 000	R 121,475 plus 36% of the amount exceeding R 512,800
R 673 001 – R 857 900	R 179,147 plus 39% of the amount exceeding R 673,000
R 857 901 – R 1 817 000	R 251,258 plus 41% of the amount exceeding R 857,900
R 1 817 001 and above	R 644,489 plus 45% of the amount exceeding R 1,817,000

Tax thresholds:

R 957 750 for taxpayers younger than 65
R148 217 for taxpayers age 65 to 74
R165 689 for taxpayers age 75 and over

Rebates:

Primary R 17 235 for taxpayers younger than 65
Secondary R 9 444 for taxpayers age 65 to 74
Tertiary R 3 145 for taxpayers age 75 and over

Medical Scheme Rebates:

R 364 per month per beneficiary for the first 2 beneficiaries
R 246 per month for each additional beneficiary

Retirement Benefits:

Pre-retirement

Withdrawal Benefits	Rate of Tax
R0 – R27 500	0%
R27 501 – R726 000	18% of the amount above R27 500
R726 001 – R1 089 000	R125 730 plus 27% of the amount above R726 000
R1 089 001 upwards	R223 740 plus 36% of the amount above R1 089 000

Post-retirement

Retirement Lump Sum Benefits	Rate of Tax
R0 – R550 000	0%
R550 001 – R770 000	18% of the amount above R550 000
R770 001 – R1 155 000	R39 600 plus 27% of the amount above R770 000
R1 155 001 – upwards	R143 500 plus 36% of the amount above R1 155 000

The following remain unchanged:

Income tax on trusts (45%)
Local interest tax exemptions (23500 for individuals younger than 65 and R 34 500 for individuals 65 years and older
Capital gains tax (CGT) inclusion rate remains at 40% for individuals and special trusts, and 80% for other taxpayers. Annual exclusions remain at R 40 000 for both individuals and special trusts, and R 300 000 for individuals in the year of death.
Dividend tax at 20%
Withholding tax at 15%
Tax-free savings account contributions remail an R 36 000 per annum and a lifetime limit of R 500 000.
Estate duty remains at 20%
No changes on Donations tax or exemptions.
Deductions to Retirement Fund is still limited to 27.5% of the greater of the amount of remuneration for PAYE purposes or taxable income (excluding retirement fund lump sums and severance benefits). The deduction is further limited to the lower of R350 000 or 27.5% of taxable income, before the inclusion of a taxable capital gain.

Disclaimer:

The information contained in this document is provided in good faith and neither the Fund nor m Cubed Employee Benefits (Pty) Ltd (or any of its officers, agents, employees or associates) can be held liable for any damages and /or losses of whatever nature and howsoever caused as a result of the reliance on the information contained herein. Should the information conflict with the rules of the Fund or the insurer’s policies relating to the insured risk benefits, the provisions of the Rules and/or the insurer’s policies will prevail. Please note that this document is issued for information purposes only and cannot form the basis for any claim against the Fund, m Cubed Employee Benefits (Pty) Ltd (or any of its officers, agents, employees or associates) or the Insurer (or any of its officers, agents, employees or associates). Your specific benefits are shown in a separate benefit statement. The information provided is not advice as defined and contemplated in the FAIS Act.

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5 ways to end financial self-sabotage

mCubed — Tue, 02 Aug 2022 08:37:15 +0000

Here’s how to break your harmful financial habits

Our biggest obstacle is often ourselves. Just consider the plans you set at the beginning of 2022 to reach your goals. Did you go to the gym? Start saving for retirement? Read that book? Or did you sabotage yourself through procrastination, perfectionism, negative self-talk, or fear of failure? Self-sabotage does not only stop you from reaching your personal goals but your financial goals as well.

Whether it’s not paying accounts on time or buying those shoes that you definitely don’t need – financial self-sabotage comes in many forms. Societal trends, consumer pressures, and a lack of discipline can keep us in a place of financial lack. But you know what? You’re not alone! We’ve all been our own worst enemy at some point.

The good news is that you can end financial self-sabotage by applying our top 5 tips.

1. Plan, plan, plan

“A goal without a plan is just a wish.” Antoine de Saint-Exupery. When you have short-, medium- and long-term financial goals, having plans to reach these goals means you are more likely to achieve them. No plans = no direction. No direction = no action. No action = Financial self-sabotage.

2. Create an honest budget and adhere to it

Having a budget is like having an eating plan. If you adhere to it, you will see wonderful results. If you ignore it, it’s just another piece of paper. Creating an honest budget and sticking to it is fantastic because you have a realistic view of how much you have and how much your monthly expenses are. Knowing what comes in and what goes out allows you to make the best financial decisions for where you’re at.

3. Avoid debt where possible

Having debt to build a credit record isn’t bad but incurring debt to sustain a lifestyle you can’t afford is not a good idea. Stick to buying things you can afford right now (consult your budget) because repaying in instalments over a long time will be more expensive and put strain on your monthly budget. If you can’t afford it and still really want it, save until you can afford it.

4. Get rid of the “I deserve this” mentality

When we work hard to build a better life, it’s only natural to want to reward ourselves. But instead of satisfying this need with something you can’t afford right now (which will only make you feel worse about your financial situation), plan and save up for rewards. You could even consider non-monetary rewards like a hike in nature, taking a nap, journaling, or watching your favourite TV show. Remember, instant gratification under financial strain is not the way to happiness.

5. Prioritise saving

Making saving a priority in your life will give you greater security, allow you to enjoy your life, and give you the financial freedom so many are searching for. It also helps you achieve your financial plans and goals much quicker and easier.

Today, you can choose between financial self-sabotage or financial self-support. We hope you will choose to support yourself to reach your financial dreams by applying these sound financial principles.

Need help?

Having an expert independent fund administrator like mCubed on your side will help you find financial freedom by having a balanced retirement plan that considers your circumstances, obligations, etc. As a member, client, or participating employer of one of our retirement funds, you have access to the best investment administration and advice, excellent service, and complete transparency for the best long-term results. Our fund-appointed FAIS accredited financial advisors are here to ensure a safe, financially sound, and prosperous retirement for you.

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