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Two-Pot Retirement System

The two-pot retirement system was created by government with the hope of promoting a culture of saving. It allows members to prioritise their retirement savings while also having emergency funds. This means that you will be able to access some of your retirement savings in an emergency without leaving employment. The date of implementation is 1 September 2024.

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Your Retirement Savings in your fund will be divided into 3 components.

Vested component


What is it?
This pot includes all your savings made before 1 September 2024 minus the amount that will be transferred as seeding capital.

When can you access it?
The current rules still to these funds. This means that when you leave your employer you can access these funds.

Savings component


What is it?
This pot will receive a once-off allocation from the vested component (up to the maximum of 10% of the fund value as of 31 August 2024, capped a R30 000). This is referred to as seed capital. One-third of your contributions from 1 September 2024.

When can you access it?
You can make one withdrawal per tax year. The minimal withdrawal per tax year is R2 000. The marginal tax rate and administration fee will be deducted before the claim is paid out.

Retirement component


What is it?
This pot will receive two-thirds of all contributions made from 1 September 2024 onwards. You cannot withdraw from the retirement component until you retire.

When can you access it?
The funds are locked in until retirement when they will be used to purchase an income.

Frequently Asked Questions

What is seeding?

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.


Is seed capital automatically applied to all members?

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.


What are the implications of using this facility?

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.


What happens if I leave my employer after the Two-Pot System is implemented?

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.


How will I be able to access my retirement savings when I retire?

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.


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