Two-Pot Retirement System

It refers to the initial funding of your savings component, sourced from the vested portion of your account. Specifically, it constitutes 10% of your account’s market value on the day before the implementation date of the two-pot system, capped at a maximum of R30,000.

The automatic seed capital allocation applies to all active members of retirement funds, as well as preserved or paid-up members and deferred retirees. However, there are specific exclusions:

1. Provident fund members who were 55 years or older on 1 March 2021 and are still in the same fund on 1 September 2024.

2. Certain retirees, such as those who have already received their full retirement benefits, may not be eligible for this allocation.

Accessing part of your savings component before retirement will decrease the amount available to you at retirement for purchasing an income or taking a cash lump sum. Additionally, you’ll miss out on the favourable tax treatment associated with taking a cash lump sum at retirement compared to making withdrawals before retirement. These early withdrawals are taxed at your marginal tax rate.

When you submit your withdrawal instruction, we will request a tax directive from the South African Revenue Service (SARS). The tax directive will specify the amount of tax to be withheld from the withdrawal and remitted to SARS. If you have any outstanding taxes, SARS may issue an IT88 deduction order, which will be applied to your withdrawal. The remaining after-tax amount will then be paid to you.

It’s important to note that these withdrawals won’t affect the tax-free withdrawal allowance available to you at retirement.

If you resign or are dismissed or retrenched after the two-pot system is implemented, you will have different rules for the different pots:

Vested pot:

1. Cash Withdrawal: you can take the money in your vested pot in cash, after deducting fees and taxes.

2. Paid-Up Option: alternatively, you can choose to keep it as “paid up” within the same fund.

3. Transfers:

   • Transfer to Your Retirement Pot,

   • Transfer to a Preservation Fund,

   • Transfer to a Retirement Annuity Fund,

   • Transfer to the Vested Pot of your new employer’s retirement fund.

Savings pot:

1. Cash Withdrawal: You can take the money in your savings pot as a cash withdrawal, after deducting fees and taxes.

2. Paid-Up Option: You can choose to keep it as “paid up” within the same fund.

3. Transfers:

   • Transfer to Your Retirement Pot,

   • Transfer to the savings pot in your new employer’s retirement fund,

   • Transfer to a Preservation Fund,

   • Transfer to a Retirement Annuity Fund.

Retirement pot:

1. Paid-Up Option: You can choose to keep the money in your retirement pot within the same fund.

2. Transfers:

   • Transfer to the retirement pot in your employer’s fund,

   • Transfer to a Preservation Fund,

   • Transfer to a Retirement Annuity Fund.

Your retirement savings will be in different pots, and there are different rules for each pot:

Vested pot:

1. Cash Withdrawal: You can take a portion of the money in your vested pot as cash. This withdrawal will be taxed according to the retirement lump sum tax table.

2. Pension Product: The remaining funds must be used to purchase a pension product (the compulsory annuitisation benefit).

3. Specific to Provident Fund Members: vested Money (contributions plus investment growth before March 1, 2021) can be fully withdrawn in cash. Two-thirds of non-vested money (contributions plus investment growth after March 1, 2021) must be allocated toward a pension product

Savings pot:

1. Cash Withdrawal: You have the option to take the full amount available in your savings pot as a cash withdrawal. However, this withdrawal will be subject to taxation based on the SARS retirement lump sum tax table.

2. Transfer to Retirement Pot: You can transfer the savings pot amount to your retirement pot. This transfer is specifically intended for purchasing a pension product.

3. Direct Pension Purchase: You also have the choice to buy a pension directly from the savings pot.

Retirement pot:

1. Pension Product Purchase: You must use the full amount available in your retirement pot to buy a pension product. Taking the money as cash is not allowed.

2. Exception for Small Amounts: If the combined value of your retirement pot is less than R165,000, you can withdraw it as cash. However, this withdrawal will be taxed according to the SARS retirement lump sum tax table.