The two-pot retirement system

Early in June 2024, the Revenue Laws Amendment Bill of 2023, which establishes a two-pot retirement system, was signed into law.  This means that from September 1, 2024 South Africans will be allowed to start withdrawing from their savings pot under the new system.

How will the two-pot system work?

From 1 September 2024, your retirement savings and future contributions will be split into 3 components or ‘pots’. Your existing savings will become your vested pot. Future contributions will be split as follows: one third to a savings pot and two thirds to a retirement pot.

What is my vested pot?

This is all the savings you have in your retirement fund by 31 August 2024 after provision of the 10% seed capital for your savings pot. This benefit will not be affected by the new rules that apply from 1 September 2024.

What is the seed capital?

To start your savings pot, 10% of your vested pot (up to a maximum of R30 000) will be used to fund the savings pot. This is a one-off allocation. The seed capital will be funded from your retirement savings as of 31 August 2024.

What is my savings pot?

This will consist of 10% from your vested pot (as of 31 August 2024) plus one third of all contributions — plus any growth on those contributions — from 1 September 2024. You will be able to make a single withdrawal per tax-year from this component. Note: the minimum withdrawal amount is set at R2 000. Withdrawals will reduce your access to a lump sum payment at retirement.

What is my retirement pot?

This will consist of the remaining two thirds of all contributions from 1 September 2024 plus any growth of those contributions. You will not be able to access the savings in this component until retirement.

Will I be taxed on my withdrawal?

Any amount withdrawn from your savings pot will be added to your taxable income and taxed at your marginal tax rate. The amount withdrawn therefore increases your taxable income and tax will be payable on the amount withdrawn. The tax will be withheld by the fund administrator. Consult with a tax specialist to understand potential tax implications.