What you need to know about the Two-pot retirement system.
When will the two-pot retirement system be implemented?
The two-pot retirement system will be implemented on 1 September 2024. This date has been set in legislation and will not change.
While this is the official implementation date, it falls on a Sunday, which means that retirement fund administrators will only implement the new system and run their processes from Monday, 2 September 2024.
Only once the new system has been implemented can applications be processed.Different administrators may take some time to implement the new system and run their new processes.
Will I be able to access my savings pot as soon as the two-pot retirement system is in place?
No. It is likely that it will take some time from the implementation date of 1 September 2024 before you can access your money. How long this will take will also depend on the retirement fund you are a member of and the systems put into place by the fund administrators.
In addition, before you can be paid out, your fund will apply on your behalf for a tax directive from the South African Revenue Service (SARS). The tax directive issued by SARS will inform your fund how much tax must be deducted before payment is made to you.
Why is the system changing?
Currently, if you resign from your job, you can access your retirement savings. Many people do this with the sole purpose of accessing their money since their retirement savings are also their only savings. So, to ensure they will still have funds to retire with, the system is changing to allow limited withdrawals while preserving a portion of the retirement savings to provide a pension in retirement.
What is the two-pot retirement system?
The two-pot retirement system introduces new rules for accessing your retirement savings. From 1 September 2024, if you are a member of a retirement fund, you will be allowed to make partial withdrawals from your retirement fund before you retire. However, a portion of your retirement fund will be preserved – in other words, you will only be allowed to access it when you retire.
This does not apply to provident or provident preservation fund members who were 55 and older on 1 March 2021. These members may opt into the two-pot system (the cutoff date is likely 1 September 2025). Members of older “legacy” retirement annuity (RA) funds are currently also excluded from the two-pot system.
Which retirement funds will be included in the two-pot system?
The two-pot system applies to:
Which retirement funds will not be included in the two-pot system?
The funds that will be excluded from the two-pot system are:
entered into before 1 September 2024 with a death benefit and savings structure;Are there any people to whom the two-pot system doesn’t apply?
Yes – some members might be excluded from the two-pot system, including:
How will the two pots be split?
From 1 September 2024, new retirement fund contributions will be split into two “pots”. Your savings pot will contain one-third of your contributions, and you will be allowed to access those funds once per tax year.
The other pot is called your retirement pot, and the funds in that pot will remain there until you retire and cannot be withdrawn unless you formally emigrate.
The new savings pot will be kickstarted by a once-off transfer of 10 percent of your existing “vested” savings as of 31 August 2024 up to a maximum of R30 000. You can access this seeding capital in your savings pot from 1 September 2024, as long as you have at least R2 000 in this pot. This seeding will happen only once and provides the starting balance in your savings pot in the fund.
What is seeding capital?
Seeding capital is the money that will automatically be transferred on 31 August 2024 from your current retired savings, into the savings pot. It will be 10 percent of what you have saved, up to a maximum of R30 000. Read more: How will the savings pot be seeded from my existing retirement savings?
What about my existing retirement savings?
All the rights you had with respect to retirement savings made before 1 September 2024 will remain. Because your historic rights will be protected for these savings, they will be referred to as your vested retirement savings (your vested pot). This means you can still withdraw your savings in this pot in cash if you resign, are retrenched, or are dismissed from an employer-sponsored retirement fund.
If your savings are in a retirement annuity (RA), the historic rules apply, and you will not be able to access this money until age 55, except under special circumstances like ill health or emigration.
How does the two-pot system differ from the current system?
In terms of the current system:
Under the two-pot system:
If you have a vested pension or provident pot (see the previous question for an explanation) in an employer-sponsored fund, you will be able to withdraw from this pot in cash if you resign or are fired or retrenched. Provident fund members who were 55 and older on 1 March 2021 can take all their savings in cash at retirement unless they opt into the two-pot system (the cut-off date to opt in is likely to be 1 September 2025).How will the two-pot system affect my preservation fund?
If you are a preservation fund member and have already taken out the once-off withdrawal that you are entitled to, the terms of the legislation provide you with another opportunity to access your funds.
Preservation funds are different from other retirement funds, because you set them up and then you don’t contribute to them again – they simply preserve the funds you had in a provident fund or a company pension fund when you leave that company.
All preservation fund members are allowed to make one withdrawal at any time before they retire. However, preservation funds will also have a savings pot, and it will receive the same initial capital of 10 percent, up to a maximum of R30 000, as other types of funds. So even if you have already made your once-off withdrawal, you will still be able to access this 10 percent (maximum R30 000), also known as seeding capital.
What happens if I don’t draw money out of my savings pot? Will I lose it?
No. Your savings pot will simply remain invested and grow, and you can withdraw it later if you need to. However, just because you can access it once every tax year doesn’t mean you should. Ideally, you should leave it to grow until retirement. You should only consider making a withdrawal if you have a real financial emergency that cannot be solved in any other way.
I have heard that I can only withdraw R30 000. Is this true?
No – it works like this: When the new two-pot retirement system is introduced on 1 September 2024, 10 percent of your existing retirement savings as of 31 August 2024 (up to a maximum of R30 000) will be transferred into your savings pot. This is referred to as your seeding capital. 
In addition, one-third of all your contributions from 1 September 2024 will be added to the savings pot, meaning it will be topped up as you contribute.
If you don’t withdraw that initial 10 percent (maximum R30 000), it will still be available for you to use. You can make a withdrawal from your savings pot once in a tax year (from 1 March to the end of February). A withdrawal cannot be less than R2 000.
When the two-pot system launches on 1 September 2024 will my retirement fund put the money from my savings pot in my account?
No, it won’t – not everyone necessarily wants to withdraw the money from their savings pot, so you will have to apply to your retirement fund to withdraw those funds if you want to use them. You will only be allowed to make a withdrawal once every tax year. And it’s advised that you only access those funds in the case of an emergency.
How do I access the money in my savings pot?
It all depends on your retirement fund – each will have its own process. You will have to communicate with your retirement fund and read any information they send you to understand the process. For this reason, it’s important that you make sure your retirement fund has your most up-to-date contact details, so you don’t miss out on any important information.
When can I withdraw my money – will it be available on 1 September 2024?
It’s not likely – before you can access that money, the administrators of your fund will have to do the seeding calculation (10% of your current savings, capped at R30 000) and transfer it into your savings pot. The law says they can do this on or after 1 September 2024. Only once they have done this calculation, will you have a balance to withdraw from your savings pot.
If you decide to withdraw money from your savings pot, you will have to follow the application process as communicated by your retirement fund; the money won’t be automatically deposited in your account. Your fund will also have to apply on your behalf for a tax directive from the South African Revenue Service (SARS). The tax directive issued by SARS will inform your fund’s administrator how much tax must be deducted before payment is made to you.
What do I need to prepare in the meantime, so I’m ready when I want to withdraw?
The fund will need to verify that you are the member, because you don’t want a situation where your hard-earned savings go to someone else! So, it’s important to ensure that your fund has your correct details – the right spelling of your name, the correct ID number and your up-to-date contact details.
Second, do you receive benefit statements for your retirement fund? Many people don’t look at them until they need to, but it’s important that you understand how much you have already saved towards your retirement. That will help you to understand how much – if anything – you are allowed to withdraw after 1 September 2024.
You will need to have R20 000 or more as a balance or fund credit in your fund on 31 August 2024 in order for your savings pot to be seeded with the minimum withdrawal amount of R2 000. If you have at least R20 000 before the seeding calculation and therefore at least R2 000 in your savings pot after it is seeded, you will be able to withdraw from the pot soon after 1 September 2024 when your retirement fund confirms it is ready to allow withdrawals.
If you do not have the minimum withdrawal amount of R2 000, you will have to wait until you contribute more to your fund and the balance in your savings pot grows to at least R2 000.
Finally, make sure you have a tax number, and that your taxes are up to date. If your tax is not up to date, and you owe SARS money and/or penalties, those will be deducted from your withdrawal first.
What can I expect if I want to withdraw money from my savings pot after 1 September 2024?
You will have to submit an application to your fund saying how much you want to take, as long as you have at least R2 000 available to withdraw.
You will also need a tax directive, which the fund will apply for. This comes from SARS, and it tells the fund what percentage of tax must be paid on the withdrawal. It will also tell the fund if you owe SARS any tax! If you do, the money you owe will be deducted from your savings pot before the balance, if any, is paid. If SARS declines to issue your tax directive, then unfortunately you will not be able to access your savings pot benefit.
Finally, you will need to provide proof of your banking account, as your withdrawal can only be paid to you, as the retirement fund member: no one else.
Once I have applied to withdraw my money, how long before I get it?
The process can take several working days, provided there are no snags, such as unverified details or incomplete application forms. In addition, fund administrators are expecting large volumes of applications, which is likely to result in delays.
Fund administrators are requesting fund members to be patient, especially in the first couple of weeks following the implementation date of 1 September 2024.
What are the pros and cons of applying for a withdrawal from my savings pot?
The main pro is that you can access some funds in case of an emergency if you don’t have any other savings.
However, the cons are many. For starters, you will have to pay tax and probably an administration fee that comes out of the amount you withdraw. But by far the biggest disadvantage is that you will be decreasing the funds available to you when you retire. You also lose out on the potential investment growth of this money.
How will the two-pot system apply to defined benefit funds like the Government Employees Pension Fund?
The two-pot retirement system will be applied to defined benefit funds using years of service to split your contributions between the savings and retirement pots. Although contributions will be allocated to each pot proportionately on a monthly basis, for each year of service you complete after 1 September 2024, four months’ worth of contributions will be allocated to the savings pot and eight months to the retirement pot.
Any savings that you, as a member, accumulate from the date you join a fund until 31 August 2024 will be allocated to the “vested pot”. These savings will be ringfenced or kept separate from savings made from 1 September 2024, and the existing fund rules will continue to apply.
The savings pot of defined benefit funds will be seeded in a similar way to other retirement funds: 10% of your existing retirement savings as at 31 August 2024, capped at R30 000, will be allocated to your savings pot. The calculation will reflect as the equivalent years (or portion of years) of service. Read more: How will the two-pot system work in defined benefit funds?
If I have more than one retirement fund, will the savings pot of each one be seeded?
Yes. If you are a member of an employer-sponsored pension or provident fund and you have a retirement annuity as well, each fund will be seeded with 10% (to a maximum of R30 000) of your savings in each of those funds when the two-pot system comes into effect.
If you have enough savings, it means you could potentially have R30 000 available in each fund on 1 September 2024.
Will my preservation fund have a savings pot?
Yes, your preservation fund will also have a savings pot that is seeded from your existing savings, but there won’t be any new contributions to grow that pot.
Is it possible that when I apply for a withdrawal, the application is denied?
Yes, it is. You could be denied a withdrawal if:
Does withdrawing from the savings pot affect my cash lump sum at retirement?
Yes, because the two-pot system gives you early access to the cash lump sum you can take at retirement.
If you withdraw these savings before you retire, you will have a reduced cash lump sum payout at retirement – you may even have nothing left of your cash lump sum payout at that point.
Also, consider that when you retire, you have the right to take up to R550 000 as a cash lump sum, tax-free. However, if you do not have this amount available to take in cash because you have not saved enough, or have withdrawn from your savings pot, or even taken your savings when changing jobs before 1 September 2024, you will lose out on the benefit of taking up to R550 000 tax-free.
Am I allowed to move money between pots
You can move money from your vested pot into your retirement pot, and from your savings pot into your retirement pot. However, you cannot move money out of your retirement pot.
If you are considering moving money from your savings pot into your retirement pot so that you aren’t tempted to withdraw it, remember that once it’s in there, you won’t be able to move it out again.
What happens if I resign after 1 September 2024? Will I be able to cash out all my funds accumulated before 31 August 2024?
Yes, you will be able to take all of your savings up until 31 August 2024 – the savings in what is known as your vested pot – as well as what is in your savings pot.
All the rights you had to your retirement savings made before 1 September 2024 stay in place. That’s why they are in the vested pot – so that those rights are protected. This means if you are a member of an employer-sponsored pension, provident or umbrella fund you can still withdraw your savings in this pot in cash if you resign, are retrenched, or are fired.
If your savings are in a retirement annuity (RA), however, the historic rules apply to the vested pot, which means you will not be able to access this money until age 55, except under special circumstances like ill health or emigration.
Read more: What can I withdraw from each pot when I leave employment and the fund?
Is it optional to join the two-pot system?
No – it’s mandatory. But it’s also automatic, so you won’t need to actually do anything – the admin will be taken care of on your behalf as long as you are a member of a retirement fund.
The only exception is provident fund members who were older than 55 on 1 March 2021. They will be given a choice to opt in. Also remember that you don’t need to withdraw from the savings pot, leaving your benefits unaffected by the two-pot system.
Which contributions will go into my savings pot – only mine?
No. All contributions to your retirement funds – both yours and your employer’s – will be divided between the savings and retirement pots.
Can I put the money back into my savings pot once I’m financially stable again?
Unfortunately, your retirement savings – and your savings pot specifically – doesn’t work like an ordinary savings account. So, you can’t put money back directly into your savings pot. You can increase your future contributions to the overall fund, and you can make a once-off voluntary contribution, but that won’t go directly into your savings pot. As with all your other contributions, one third will go into your savings pot, and two thirds will go into your retirement pot.
Can I only contribute to the savings component and not the retirement component?
No, you can’t allocate contributions directly into your savings pot – your contributions will automatically be split between the savings and retirement pots. You can increase your future contributions to the overall fund, and you can make a once-off voluntary contribution, but that wouldn’t go directly into your savings pot. As with all your other contributions, one third will go into your savings pot, and two thirds will go into your retirement pot.
Why can't I withdraw from my retirement pot if I am retrenched or if I resign?
Retirement fund legislation is changing, and from 1 September 2024 you will no longer be permitted to withdraw from the retirement pot. The two-pot system is being set up to help protect people’s retirement savings and ensure they have something to live off when they do retire one day.
Why can I only withdraw money from my savings pot once a year?
Retirement fund legislation is changing, and this is the new rule. Remember that the savings pot is designed to give you early access to your lump sum payout at retirement, so the once-a-year withdrawal is supposed to be a means to provide financial relief in case of an emergency.
However, it’s important to understand the potential long-term risks – not only will it reduce the lump sum repayment you get at retirement, but there are tax implications too. While your savings are in the fund, they are tax-deductible and tax-free. But as soon as you withdraw funds, they will be taxed at marginal rates just like your normal income. And, if you owe money to SARS, that will be deducted from your withdrawal first, and you will get whatever is left.
Should I resign from my employer before 1 September to make sure I don’t get locked into my retirement fund?
No, it is not necessary to put yourself at risk of being unemployed as you will still have access to any savings you made in an employer-sponsored pension or provident fund before 1 September 2024, and to your savings pot after 1 September 2024 if you resign at any time.
The new rules under the two-pot retirement system restricting withdrawals only apply to two-thirds of your savings made from 1 September 2024.
This is a big change for members of pension and provident funds who have been able to make full withdrawals each time they leave their employer – whether they resign or are retrenched or fired.
But this is a key reason why the two-pot system is being instituted – to protect members from withdrawing all their money and ensuring they have money on which to retire.
If you withdraw all of your savings each time you leave a job, you will set yourself up for a very difficult, financially constrained retirement. Read more: What can I withdraw from each pot when I leave employment and the fund?
Can the government get access to my retirement savings through this two-pot scheme?
No. Your savings will continue to be managed by the same companies that have always managed them. In essence, the two-pot system is an accounting calculation – your contributions from 1 September 2024 are simply allocated to the separate pots, which allows your fund to calculate what they can release from the savings pot if you decide to make a withdrawal.
What happens in the event of a divorce?
Under the legislation before 1 September 2024, the total value of a member’s retirement fund or funds was considered when retirement savings were divided for divorce settlements. A court granting a divorce decree may order the transfer of part, or all, of this pension interest of a member spouse to the non-member spouse.
While the two-pot system won’t change the overall value of a spouse’s retirement savings, there are important differences to how things will be handled.
Retirement fund administrators must be notified when a couple is initiating divorce proceedings. This is to ensure that no withdrawals are made from the savings pot during the legal process, and that assets are divided correctly between the parties according to the law.
However, the approach will stay the same. When the assets are divided, the total value of the retirement savings – including savings in the vested pot, the savings pot and the retirement pot – will be considered for division.
It is advisable to consult a financial adviser to understand your situation if you are contemplating, or going through, a divorce.
How does the new rule apply to paid-up retirement annuities?
As you are no longer making contributions to a paid-up retirement annuity, your fund can’t split future contributions between the savings and retirement pots. However, a savings pot will be created soon after 1 September 2024, and it will be seeded with 10% of your fund credit or balance as at 31 August 2024, to a maximum of R30 000. If you do not withdraw this amount, it will remain in the savings pot and you can access it later or to take it in cash at retirement.
Can I change allocation to the savings and retirement components?
No, you can’t, as the allocation is decided by law and will be applied to all contributions by all members from 1 September 
2024 (except for a few funds and members who are excluded from the two-pot system). You can increase your future contributions to your fund overall, and you can make a once-off voluntary contribution, but you cannot contribute only to your savings pot or retirement pot. As with all your other contributions, one third will go into your savings pot, and two thirds will go into your retirement pot. You can transfer money in your savings pot to your retirement pot, but once you have done that, you can't reverse your decision, and you will then have to use the money to buy a pension or annuity at retirement.
What happens if I choose to not withdraw any of my retirement savings?
Nothing – the money in your savings and retirement pots will simply continue to grow. You can still access any money in the savings pot if you need to do so at a later date. The money that remains in your savings pot 
until you retire can be accessed as a cash lump sum when you do retire. If you take it in cash at retirement, it will be taxed as a lump sum benefit according to the retirement lump sum tax table. The good news is that these tax rates are generally lower than the marginal tax rates that will be applied to any withdrawals you make from your savings pot before retirement.
Why is the savings withdrawal being taxed when it is my money that I have contributed?
When you contribute to a retirement fund, you receive a tax deduction. This tax deduction is an incentive to encourage South Africans to provide for their own retirement and not to rely on the state for a pension. Under the two-pot retirement system, the incentive you enjoyed for contributing to a retirement fund is basically taken away if you withdraw from your fund.
In South Africa, any lump sum received from a retirement fund, whether you receive it at retirement, or withdraw it before you retire, is taxed. So, tax on savings pot withdrawals isn’t a new tax.
However, to incentivise you to save until retirement, the tax rates are lower at retirement. This means you can take up to R550 000 as a cash lump sum tax free, while withdrawals from the savings pot will be taxed at a higher rate, known as your marginal tax rate. This is the rate that applies to your taxable income, so being taxed at this rate effectively cancels the benefit of the tax deduction.
Why can’t I withdraw from my retirement pot if I am retrenched?
At the moment the legislation doesn’t allow for you to withdraw from the retirement pot if you are retrenched. You will only be able to withdraw from:
What happens if I move to another employer and transfer my savings to my new employer’s retirement fund?
When you move to a new employer and move your retirement savings to their fund, all of your pots will move to that new fund, and the balances in 
the new fund for each pot will reflect the amounts that transferred from your old fund. Then, when you start contributing to the new fund, your contributions will be divided between the savings and retirement pots, and will be added to your existing savings.
How can I get money out of my savings pot?
Each retirement fund will have its own process, and they will communicate that to you when the system comes into effect. But there are some things you can do to prepare in the meantime.
Before you even apply to withdraw from your savings pot, you need to check the following:
1. Your fund has your name correct - it should match your ID.
2. Your fund has your correct contact details.
3. You have a tax number.
4. Your tax status is "compliant" - which means that you have paid all taxes owing. Remember that if you owe SARS any tax, it will be deducted from any savings pot withdrawals you make.
Next, check that your retirement fund is not one of the few that are excluded from the two-pot system. If you are an older provident fund member (55 years and older on 1 March 2021), you will need to opt in to the two-pot system.
Then, check that you will have enough in your savings pot – there is a minimum withdrawal amount of at least R2 000.
Finally, find out from your retirement fund how to apply for a withdrawal. Also find out how to calculate how much you will get out once you’ve paid tax and fees, before you submit your application. Read more: How can I withdraw from the savings pot?
Will the one third contributed to the savings pot still be tax deductible?
Yes, the full three thirds (ie 100 percent) of your retirement fund contributions will be tax deductible as long as you contribute within the tax 
deduction limits. You will enjoy that benefit as long as your contributions remain in your retirement fund. However, if you withdraw from your savings pot, you will effectively pay the tax deduction back when the withdrawal is taxed at your marginal tax rate.
Is there a limit to how much I can withdraw from the savings pot?
There are two limits. The first one is that you can only withdraw from the 
savings pot once a tax year. Second, you can only withdraw what is in the savings pot at the time that you apply – no more. Initially this will only be the seeded amount but if you do not withdraw it, it will grow as your contributions are added.
What will happen to the investment returns earned on my contributions after 1 September 2024?
Your savings in the fund and in each pot will continue to earn returns after 1 September 2024. The returns will be allocated to each pot and they will each continue to grow. Each retirement fund will make its own decisions about the fund’s investments and how to deal with them, to accommodate withdrawals from members’ savings pots. Your fund’s trustees will assess your fund’s needs and communicate if there are any investment changes required.
