A list of frequently asked questions (FAQs) has been published by National Treasury regarding the proposed two-pot retirement system.
Here are some of the questions and answers:

What is the two-pot retirement system?

The two-pot system is a reform that will allow you to make partial withdrawals from your retirement savings before you retire, while preserving a portion of your retirement savings that can only be accessed when you retire.

How will it work?

The reform creates a ‘savings component’, a ‘retirement component’ and a ‘vested component’. Only the savings component and the retirement component can receive your retirement contributions from the date that the two-pot system is implemented. The vested component will house the retirement savings you accumulated before the implementation date. Investment growth will still be credited to the vested component.

Does this apply to our retirement fund?

The new two-pot system will apply to all retirement funds. This is for both private sector and public sector funds, except for the old generation or legacy retirement annuity policies, or funds with no active participating members (such as funds in liquidation, beneficiary funds, closed funds or dormant funds).

Why the two-pot system?

The two-pot system is meant to support long-term retirement savings while offering flexibility to help you if you are in financial distress.

What is seeding capital?

It is proposed that on 31 August 2024, 10% or R30 000 of your fund credit, whichever is lower, will be allocated to your savings component. This is called seeding capital.

Provident fund members who are 55 years or older

By default, if you are 55 years or older on 1 March 2021, you will not be included in the two-pot system. You may however elect to participate.

Where will the seeding capital come from for members younger than 55 years old?

For members who are less than 55 years old on 1 March 2021, their seeding capital will be taken proportionally from their vested pot and their non-vested pots.

What is next in the process?

Once the two bills (the Pension Funds Amendment Bill and the Revenue Laws Amendment Bill) have been signed into law by the President, retirement funds must apply for rule amendments with the Financial Sector Conduct Authority and change their systems to implement the two-pot system from 1 September 2024.

What should you do?

  • Ensure that your retirement fund has your correct contact details.
  • Keep an eye out for communication from Alexforbes.
  • Carefully consider your options and seek advice from a certified financial advisor.
  • Do not let anyone pressure you to do anything that is not in your interest.
  • If you need help but do not know where to start, contact your retirement fund.

The two-pot system and your retirement savings

It is proposed that from 1 September 2024 any new retirement contributions that you save into your retirement fund will be split into two pots – a savings pot and a retirement pot.
Click here if you want to find out more about the two-pot system and making withdrawals.