How much will the two-pot system allow me to withdraw?

Key takeaways

  • Retirement fund members in eligible funds will be able to withdraw from the savings pot of their retirement fund after 1 September 2024 without leaving their job.

  • The amount you can withdraw depends on how much is in your savings pot.

  • The withdrawal must be at least R2 000.

  • Your withdrawal may be denied in certain limited circumstances such as:

    • A court order stating you cannot be paid your benefit;

    • Your employer has a judgment against you stating that you owe damages;

    • You are getting divorced;

    • You owe maintenance; or

    • You have a housing loan guaranteed by your fund.

The two-pot system allows you to withdraw from your retirement savings while you are still employed and a member of the fund – but only what is in your savings pot.

The savings in your retirement pot cannot be withdrawn before retirement.

Your savings pot will get a once-off transfer from your savings made up until 31 August 2024 - it will be seeded from your vested pot.

After 1 September 2024 it will be funded by one third of the contributions you make and the growth on the money in that pot.

Rules for withdrawing

The rules for withdrawing from the savings pot are:

  • You will be allowed to make one withdrawal in each tax year (1 March to 28 February) of at least R2 000.

    You do not have to withdraw what is in your savings pot in any tax year. Any savings remaining at the end of a tax year will carry over to the next year and be available for withdrawal in the following year. Any amount remaining at retirement can be taken in cash.
  • If you have less than R2 000 in your savings pot, you won’t be able to withdraw it.  The only exception to this rule is when you leave a fund (when your employment terminates), on resignation for example. In this case, if your savings pot has a balance of less than R2 000, you will be able to withdraw it even if you have already made a withdrawal in that tax year.

  • Any withdrawal from the savings pot will be taxed at your marginal tax rate – so you will not receive the full amount you withdraw. The administrator of your fund will also be able to deduct transaction or administration costs.

The savings you have left in your savings pot when you retire, can be taken in cash.

Up to R550 000 of the amount you take in cash may be tax-free. The tax-free amount at retirement will be affected by withdrawals you have made before retirement from the vested pot.

When could I be denied a withdrawal from my savings pot?

The rules for deductions from the savings pot and certain limited deductions that may be made from your retirement fund may prevent you from withdrawing.

The Pension Funds Act has always provided only for certain limited deductions that could be made from your retirement savings before they are paid out. Read more: Can any money be deducted from my retirement savings?

The two-pot legislation provides that you may be unable to withdraw from your savings pot in your fund (take a savings withdrawal benefit) if:

You have already taken a savings withdrawal benefit from the savings pot in any tax year;

On withdrawing from the fund (leaving the fund on termination of employment), you have already withdrawn in that tax year and you have more than R2 000 in your savings pot;

You or your spouse have instituted divorce proceedings - access to your savings pot may be denied until the court order is finalised;

A court order states that a benefit may not be paid to you;

Your employer has a judgment against you for damages arising from misconduct and your withdrawal will result in insufficient savings to meet that claim. Alternatively, your savings withdrawal benefit may be suspended for 12 months to allow your employer to institute such a claim;

You owe maintenance to a former spouse or for your children or there is a pending maintenance order and a maintenance investigating officer has issued written notification of the pending maintenance claim that may be instituted against your fund;

You have a housing loan that is guaranteed by your fund benefits and withdrawing would not leave enough to repay the loan.

Thus, the fund may have to ask you questions about, amongst other things, divorce and maintenance actions and orders before it cans pay you any amount from your savings pot.