The Two-Pot Retirement System officially came into effect in South Africa on 1 September 2024, marking the most significant reform to retirement savings in decades. It aims to balance immediate financial relief with long-term retirement preservation, allowing members to access a portion of their retirement savings without dismantling their future financial security.
In this guide, we explain how the system works, who qualifies, the withdrawal limits, tax implications, and tips to make the most of the changes.
What is the Two-Pot Retirement System?
The Two-Pot Retirement System is a retirement savings model introduced by the National Treasury to allow South Africans to access part of their retirement funds before retirement age while safeguarding the majority of their savings for the future.
It applies to:
- Pension funds
- Provident funds
- Retirement annuities
Under the system, retirement contributions are split into two separate pots:
- Savings Pot – Allows limited pre-retirement withdrawals.
- Retirement Pot – Preserves funds until you reach retirement age.
How Contributions Are Split
From 1 September 2024:
- One-third of all new retirement contributions goes into the Savings Pot.
- Two-thirds goes into the Retirement Pot.
- Existing balances (before 1 September 2024) go into a third “Vested Pot,” which remains under the old rules.
Withdrawal Rules and Limits
- You can make one withdrawal per tax year from your Savings Pot.
- Minimum withdrawal: R2,000.
- Maximum withdrawal: The full balance of your Savings Pot (subject to tax).
- The Retirement Pot cannot be accessed until retirement.
Example:
If your Savings Pot balance is R30,000 and you withdraw R10,000, the remainder stays invested and continues to grow until you withdraw again in a future tax year.
Tax Implications
Withdrawals from the Savings Pot are taxed at your marginal income tax rate in the year you make the withdrawal. This means:
- If you are in a higher tax bracket, you will pay more tax.
- These withdrawals do not qualify for the preferential retirement lump-sum tax tables.
At retirement:
- Retirement Pot funds follow the standard retirement tax rules (up to one-third as a lump sum, with the balance used to buy an annuity).
- Vested Pot funds follow the old system rules.
Benefits of the Two-Pot Retirement System
- Emergency access to funds without resigning from your job.
- Protection of long-term savings by keeping most contributions in the Retirement Pot.
- Simplified structure for fund members and administrators.
Risks to Consider
- Withdrawals reduce your future retirement income.
- Tax on withdrawals may be higher than you expect.
- Over-reliance on early withdrawals could undermine retirement goals.
How to Calculate Withdrawals
Most retirement fund administrators now offer online calculators to:
- Estimate your Savings Pot balance
- Project the impact of withdrawals on your retirement income
- Calculate tax on withdrawals
How to Withdraw from the Two-Pot System
- Contact your retirement fund to check your Savings Pot balance.
- Submit a withdrawal request using their forms or online platform.
- Provide supporting documents, such as a certified copy of your ID and bank confirmation letter.
- Wait for processing – payouts are typically made within 10–15 business days.
Frequently Asked Questions (FAQs)
1. How much can you withdraw from the Two-Pot Retirement System?
You can withdraw any amount from your Savings Pot, subject to a minimum of R2,000, once per tax year.
2. Is there a safe way to check your balance?
Yes. Use your retirement fund’s secure online portal or contact them directly.
3. What is a good strategy for using the Two-Pot withdrawals?
Only withdraw for true emergencies and leave funds invested to benefit from compound growth.
4. What happens to the Vested Pot?
It remains under the old rules – you cannot access it until retirement or resignation.
Final Thoughts
The Two-Pot Retirement System offers South Africans a way to balance present needs with future financial security. By understanding the rules, limits, and tax consequences, you can make smarter decisions that protect your long-term retirement goals.
Tip: Always consult a financial adviser before making a withdrawal to ensure you are not harming your future financial health.
