There are some important new changes coming TO RETIREMENT FUNDS IN SOUTH AFRICA.
THE TWO-POT SYSTEM IS BEING INTRODUCED BECAUSE MANY MEMBERS struggle financially when they retire.
PLEASE NOTE: The proposed effective date is 1 September  2024. You cannot withdraw any money before this date.
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Why do we need the two-pot system?

These changes are needed because many members struggle financially when they retire. Currently, members often withdraw their retirement savings in cash when they change jobs. Because of this, they don’t have enough to live on when they retire.

The two-pot system will help members keep their savings invested for their retirement and help members have enough to live on once they retire.

The savings pot means that members can now get some cash from their retirement savings without leaving their job or retiring. They can withdraw these savings once in a tax year if they have at least R2 000 in their savings pot.



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

How will your contributions be split?

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

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One-third of your contributions will automatically go 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. Your withdrawal must be more than R2 000.

What will happen to my existing retirement savings?

Before 1 September 2024, your retirement savings will not be affected by the new two-pot system. You can only withdraw cash from these savings if you leave your employer or retire. After 1 September 2024, a small amount of your existing retirement savings will be moved to your new savings pot.


Some of your existing retirement savings will be moved to your new savings pot

  • A small amount of your existing retirement savings will be moved to your new savings pot.
  • This amount is expected to be 10% of your existing retirement savings.
  • This initial amount in your savings pot cannot be more than R30 000.

If you are 55 years or older

  • The new two-pot system changes will not automatically apply to members who are 55 years or older on 1 March 2021.
  • This means that the old rules will still apply to all your retirement savings.
  • You may however choose to participate in the two-pot system and have a retirement pot and a savings pot.

Why is the two-pot system being introduced?

  • Many members withdraw their retirement savings in cash when they change jobs, because they are struggling financially. 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.

Think of your future

Although the two-pot system will allow you to withdraw some cash from your savings pot before you retire, it is better to keep all 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.

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

You will not be able to make any decisions yet. You need to wait until the Two-pot System has been finalised and becomes law. This is expected on 1 September 2024).

SA National Treasury Regulatory Update FAQs

A list of frequently asked questions (FAQs) has been published by National Treasury regarding the proposed two-pot retirement system.
FAQs
Click here to read some of the National Treasury regulatory update FAQs