September 2024 marked a major shift in how South Africans save for retirement. The new Two‑Pot Retirement System changes the rules around accessing retirement funds, giving members limited flexibility to withdraw money before retirement while protecting the bulk of their savings for the long term.

How the System Works

• Savings Pot: One‑third of new contributions. Accessible once per tax year for emergencies. Minimum withdrawal R2 000.

• Retirement Pot: Two‑thirds of contributions. Locked until retirement. Must be used to buy a pension or annuity.

• Vested Pot: All savings before 1 September 2024 remain under old rules. In August 2024, 10% (capped at R30 000) was transferred into the Savings Pot.

What You Can Access

The Savings Pot is designed for genuine emergencies. You can withdraw once per tax year, between 1 March and 28 February. Withdrawals below R2 000 are not allowed. There is no maximum withdrawal, but every rand taken out reduces what you will have at retirement.

The Tax Reality

Withdrawals from the Savings Pot are taxed at your marginal income rate. Higher earners could lose up to 45% of the withdrawal to tax. Retirement funds must obtain a SARS tax directive before paying out, and outstanding taxes are deducted first.

Changing Jobs

Under the old system, many South Africans cashed out their pensions when changing employers, leaving them with little for retirement. The Two‑Pot system prevents this. Your Retirement Pot must be preserved. Only the Savings Pot can be accessed once per tax year, subject to the R2 000 minimum.

Special Rules for Older Members

If you were 55 or older on 1 March 2021 and belong to a provident fund, you can choose to remain under the old system or opt into the Two‑Pot system. This decision requires careful advice, as it affects how your contributions are treated until retirement.

What You Need to Know

• Effective date: 1 September 2024

• Split: One‑third Savings Pot, two‑thirds Retirement Pot

• Access: Savings Pot once per tax year; Retirement Pot only at retirement

• Seeding: 10% of pre‑2024 savings (capped at R30 000)

• Tax: Savings withdrawals are taxed at the marginal rate; retirement withdrawals are taxed under retirement tables

• Who it affects: Pension, provident, retirement annuity, and preservation fund members

The Bigger Picture

National Treasury introduced the system because fewer than 6% of South Africans retire with enough money to maintain their standard of living. The reform aims to preserve long‑term savings while offering limited emergency access.

The Two‑Pot system is a safeguard, giving workers a safety net today while protecting their retirement tomorrow.