The two-pot retirement system splits your contributions after 1 September 2024 into your savings and retirement pots. Your savings pot funds the cash you can take a retirement and the retirement pot provides you with an income in retirement.
If you withdraw from the savings pot before you retire, you will essentially be accessing early the cash lump sum you should be entitled to at retirement.
If you have retirement savings made before 1 September 2024 in your vested pot, you can take one third of that in cash at retirement.
If you take it all the money in your savings pot before you retire, the cash you can take at retirement will be limited to one third of what is in your vested pot (savings before 1 September 2024). If you have previously withdrawn that on resignation you won’t be able to take any cash and must use whatever is in your retirement pot to buy a pension.
This is what you will be able to withdraw in cash at retirement:
At retirement, generally, as a member of a pension fund or a retirement annuity fund, you will be able to withdraw one third of your savings in the vested pot as a cash lump sum.
Provident fund members can withdraw what they have saved in a provident fund up to 1 March 2021 (and the fund return on that) as a cash lump sum.
They will also be able to draw one-third of any savings in the vested pot between 1 March 2021 and 31 August 2024.
| TIP Bear in mind that you may need a cash lump sum at retirement for  medical expenses, to relocate to a retirement home or to buy a new car, so you should consider this carefully before you withdraw from the savings pot before retirement. |
Any member who has a savings pot under the two-pot retirement system can take all the savings in this pot in 
cash at retirement.
If you withdraw the savings from your savings pot before retirement, you effectively reduce your pot of cash at retirement.
Nothing in this pot can be taken in cash. It must be used to buy a pension or 
annuity that will pay you a monthly income in your retirement. Read more: What kinds of annuities (pension) can I buy when I retire?
The only exception is if your retirement pot added to two-thirds of the amount in your vested pot (with which you need to buy an annuity) amounts to R165 000 or less. If this is the case, you can take the retirement pot and the amount in your vested pot in cash.
At retirement, all or part of your cash lump sum may be tax-free.
You are entitled to take up to the first R550 000 of any lump sum withdrawn tax free.
This is provided you have not taken lump sum withdrawals at certain times previously from any of your funds as these could reduce the R550 000. Read more: What tax will I pay when I retire? (smartaboutmoney.co.za)
The key to accessing this tax-free benefit is that if you do not have any cash to withdraw at retirement you cannot use it and if you have reduced your cash benefit by making withdrawals from your savings pot, you may reduce the portion of this benefit you enjoy.
For this reason you should think carefully about any withdrawals you make.
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REMEMBER THE TAX DIFFERENCES If you take money out of your savings pot before retirement, you pay tax on it at your marginal tax rate. If you take money from your savings pot when you retire, it is taxed on the retirement lump sum tax table (rates up to 36 percent) and you could get some, most or all of it tax free (potentially up to R550 000). 
The tax-free benefit is one you only enjoy once – not for each fund to which you contribute. Lump sums taken as withdrawals or on retirement before the two-pot system was introduced could reduce the tax-free amount to which you are entitled. |
