Two-pot System | Woolworths Group Retirement Fund

THE TWO-POT SYSTEM

There are some important new changes to RETIREMENT FUNDS IN SOUTH AFRICA.

THE TWO-POT SYSTEM was INTRODUCED TO ASSIST MEMBERS FINANCIALLY BEFORE THEY RETIRE AS WELL AS HELP THEM SAVE FOR RETIREMENT.

Why do we have the two-pot system?

The two-pot system is needed because many members struggle financially before they retire and are also not saving enough for retirement. In the past, members would change jobs in order to withdraw from their retirement savings. Because of making withdrawals, they often didn't have enough to live on once they retired. The two-pot system helps you keep your savings invested for your retirement.

The two-pot system allows you to withdraw some cash from your retirement savings without leaving your job or retiring. You will be able to make a withdrawal once every a tax year if you have at least R2 000 in your savings pot.

How are your contributions split?

Two-thirds of your contributions go automatically into your retirement pot.

One-third of your contributions go automatically into your savings pot.

Making withdrawals

You may not withdraw any cash from your retirement pot.

You may withdraw cash from your savings pot once every tax year.

This is for emergencies only, and you must remember that these savings are for your retirement.

You will pay tax on any cash you withdraw.

You must have at least R2 000 in your savings pot in order to withdraw.

The minimum amount you may withdraw is R2 000.

If you do not withdraw from your savings pot, you will NOT lose your money.

LEARN MORE

Click here if you want to find out more about the two-pot system and making withdrawals.

You must register on AF Connect

To make a withdrawal from your savings pot, you must register on AF Connect. Click here to login or to register on AF Connect.

This allows you to apply to withdraw money from your savings pot.

You may withdraw cash from your savings pot every tax year.

Your withdrawal must be more than R2 000.

Go to AF Connect

KEEP SAVING FOR YOUR RETIREMENT

Although the two-pot system allows you to withdraw some cash from your savings pot before you retire, it is better to keep your retirement savings invested for your retirement. This will give you and your family the best chance of having enough money to live on when you stop working.

If you really need to withdraw from your savings pot, speak to an accredited financial adviser, who can then help you make the best decisions.

Save separately for emergencies

You should try and have separate savings for emergencies. The general rule is to save the equivalent of three months' salary. Having emergency savings in a separate account can help you with financial challenges and will preserve all your retirement savings for your future.

Think of your future

Because they are struggling financially, many members withdraw their retirement savings in cash when they change jobs. This means they often don't have enough money to live on when they retire.

You are not allowed to withdraw from your retirement pot, even when you change jobs. You must keep these savings invested for retirement, which means you will have more money saved when you retire.

If you have a financial emergency or challenges before you retire, you will be able to withdraw some cash from your savings pot without leaving your job. You can withdraw these savings once per tax year if you have at least R2 000 in your savings pot.

What is My Vested Pot?

What happened to my retirement savings from before the two-pot system?

On 1 September 2024, 10% of your existing retirement savings or R30 000, whichever is smaller, was moved to your new savings pot.

Your retirement savings before 1 September 2024, and any investment growth on those savings, are not affected by the two-pot system.

What is my vested pot?

On 1 September 2024, your Fund Credit that was not moved into your savings pot, was allocated to your vested pot.

No contributions are made to the vested pot. This money is left to earn investment returns.

You cannot make withdrawals from this pot until you exit the Fund.

If you resign, you can:

transfer your vested pot to your new employer

transfer your vested pot to another approved fund

withdraw some of your savings or

withdraw all of your savings.

What about tax?

Withdrawing cash from your savings pot has tax implications

If you make a withdrawal from your savings pot, the cash will be included in your gross income for the tax year.

This means the amount withdrawn will be taxed at your personal income tax rate.

The withdrawal amount could push you into a higher tax bracket.

Whenever possible, you should avoid making a withdrawal from your savings pot

Keep your retirement savings invested for the longest time possible. This will significantly impact the amount of money you will have for an income once you retire.

Withdrawing from your savings pot reduces the amount of money you will have to live off once you retire.

Withdrawing also breaks the compounding interest process where your interest earns interest.

Frequently Asked Questions

The old rules of the Fund have applied to any money you saved before 1 September 2024, including any increase in value from investing these savings until you retire. This is called your vested pot.
On 1 September 2024, some of your retirement savings were automatically moved to your savings pot. This was 10% or R30 000, whichever was lower. The first amount in your savings pot cannot be more than R30 000.

If you have NEVER withdrawn any cash from your savings pot before you retire – When you retire, you can withdraw up to R550 000 in cash, TAX FREE.
If you withdraw cash from your savings pot before retirement, you will pay tax at the highest tax rate that applies to you (SARS calls this your marginal tax rate).
You will also decrease the amount that you have available to withdraw in cash when you retire.

PLEASE NOTE: You will pay tax on withdrawals from your savings pot before you retire. If you wait until you retire to withdraw cash from your savings pot, you will get up to R550 000 tax free.

You may not have enough cash to meet your needs when you retire. This is important because most members need available cash when they retire to pay off debts, pay medical bills, etc.
You will pay tax at the highest tax rate that applies to you (SARS calls this your marginal tax rate) on any amounts you withdraw from your savings pot before you retire.
You may not have enough retirement savings to live on once you retire.

SA National Treasury Regulatory Update FAQs

A list of frequently asked questions (FAQs) has been published by National Treasury regarding the two-pot retirement system.

FAQs

Click here to read some of the National Treasury regulatory update FAQs

Scan to Connect

AF WhatsApp service

Using our WhatsApp service not only registers you to AF Connect and grant you access to two-pot information, but you also get to access other financial services.

With Alexforbes WhatsApp you can:

Request your most recent tax certificate, most recent benefit statement and fund balance.

Track the status of a claim.

Register on AF Connect or reset your password.

Access financial education.

PLEASE NOTE

The information provided is accurate as of the date of publication and will be reviewed and updated on a regular basis to reflect any changes in legislation.