South Africa's Two-Pot Retirement System came into effect on 1 September 2024, fundamentally changing how retirement fund members can access their savings. Here is what you need to understand before making any decisions.
What Is the Two-Pot System?
The Two-Pot Retirement System divides your retirement savings into two distinct components — a “savings pot” and a “retirement pot.” The intention is to give members limited access to funds in an emergency, while protecting the majority of savings for retirement.
The Savings Pot
One-third of all new retirement contributions made after 1 September 2024 flow into the savings pot. Members are permitted to make one withdrawal per tax year from this pot, subject to a minimum withdrawal of R2,000.
The Retirement Pot
Two-thirds of all new contributions flow into the retirement pot. This component is fully preserved — meaning you cannot access it before retirement under any circumstances. At retirement, it must be used to purchase an annuity.
What About Savings Before 1 September 2024?
Funds accumulated before the implementation date form a third component called the “vested pot.” These funds remain governed by the rules of your existing fund.
Tax Implications
Withdrawals from the savings pot are taxed as ordinary income in the year they are taken. SARS will deduct tax at source via your retirement fund administrator. This is a critical planning consideration — unplanned withdrawals could push your taxable income into a higher bracket.
What This Means for Your Retirement Planning
The Two-Pot System requires a fresh look at your retirement income strategy. Members who previously relied on the idea of accessing retirement funds in an emergency should now assess whether their emergency savings outside of retirement funds are adequate — to avoid unnecessary tax on savings pot withdrawals.
CEG Wealth Advisory Team
Wealth Advisors
The CEG Wealth advisory team provides independent retirement, tax, and estate planning advice to South African individuals and families.