2024 Two-Pot System - FAQ

FREQUENTLY ASKED QUESTIONS | 2024
TWO-POT
RETIREMENT
SYSTEM
TWO-POT RETIREMENT SYSTEM
WHAT IS THE 'TWO- pot system also protects a portion of savings to only
be used for retirement.
POT' SYSTEM OF
RETIREMENT? HOW WILL IT WORK?
The two-pot retirement system is a reform that will The reform creates a “savings component”, a “retirement
allow retirement fund members to make partial component” and a “vested component”. Only the
withdrawals from their retirement funds before “savings component” and “retirement component” can
retirement, while preserving a portion that can only receive retirement contributions from implementation
be accessed at retirement to help improve retirement date onwards. The vested component will house
outcomes. This means members need not resign to retirement benefits accumulated by the member
access part of their retirement benefit if they are in before the implementation date. Investment growth
financial distress. This reform will come into effect on will still be credited to this component.
1 September 2024.
From 1 September 2024, retirement contributions
WHO IS IT MEANT FOR? will be split by your retirement fund into a savings
component (or pot) and a retirement component.
The new system will apply to all retirement funds, A ratio of 1/3 (one-third) of total contributions will go
that is, both private sector and public sector funds, into the savings component and 2/3 (two-third) of total
except for the old generation or legacy retirement contributions into the retirement component.
annuity policies, or funds with no active participating
members (such as funds in liquidation, beneficiary
funds, closed funds or dormant funds). Pensioners For example, if person A’s retirement
and members of provident funds that were 55 years contribution in September 2024 is R900 per
and older on 1 March 2021 who have not opted to be month, R300 will go to the savings component
part of the two-pot system will also be excluded. and R600 into the retirement component.
Person A would be able to withdraw any
amount from the savings component, the
WHY THE TWO-POT withdrawal should not be less R2 000 and a
SYSTEM? withdrawal can only be made once in a tax
year. One does not need to make a withdrawal
This system is meant to support long-term retirement from the savings component every tax year.
savings while offering flexibility to help fund members Amounts in the account will still be available
in financial distress. In many cases, retirement funds for withdrawal in future years and would
are the only savings that fund members have. Under benefit from tax-free growth within the
the current system, some members resign to access account until a withdrawal is made.
their retirement fund savings to pay off debt, which
is detrimental from an economic, financial planning
and retirement provision point of view. The two-pot The savings component will be accessible at any time,
system is meant to help fund members in times of but withdrawals must be a minimum of R2 000 and, but
financial difficulty by allowing access to the savings only one withdrawal may be made in a tax year. What is
component before retirement. It is advisable that withdrawn will be taxed at the individual’s marginal tax
members use the savings component sparingly and rate. There is no maximum withdrawal limit on the
only when there is a dire need. Importantly, the two- savings component.
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The retirement component cannot be accessed on

resignation and may only be accessed at retirement.
PROVIDENT FUND
That means it will be preserved until retirement. MEMBERS 55 YEARS
Retrenchment cases will be dealt with in another OR OLDER ON
phase of this reform process.
1 MARCH 2021
The retirement value accumulated as at 31st August These members will not be included in the two-pot
2024, referred to as the “vested component”, will not system by default, but they may elect to participate
take further contributions but will remain invested by should they wish to. They can do so by applying to
the retirement fund. Should you resign in future, your their provident fund. Should they elect to be in the
current right (vested right) to access this component two-pot system, they cannot reverse their decision.
or have it transferred to a preservation fund is
maintained
WHERE WILL THE
WHAT IS SEED SEEDING COME FROM
CAPITAL? FOR PROVIDENT FUND
From the value of your fund on 31st August 2024, 10%
MEMBERS LESS THAN
or R30 000, whichever is lower, will be allocated to the 55 YEARS OLD IN 2021?
savings component. We call this seeding capital. This For the provident fund members who are less than 55
will be a once-off transfer at the start of the two-pot as on 1 March 2021, their seed capital will be taken
system and will not be repeated in the following years. proportionally from the pot that was vested in 2021
and the non-vested pots.
For example, if you have a R200 000 fund WHAT IS NEXT

value on 31stth August 2024 the seeding
amount will be R20 000 (this being 10% of
IN THE PROCESS?
R200 000). Once the two bills (the Pension Funds Amendment
Bill and the Revenue Laws Amendment Bill) have
If another member has R750 000 fund value been signed into law by the President, retirement
funds must apply for rule amendments with the
in the vested component, the seeding amount
Financial Sector Conduct Authority and change their
will be R30 000 since 10% exceeds the cap of systems to implement the two-pot regime from 1
R30 000. Despite R75 000 being 10% of R750 September 2024. Funds will also communicate with
000, this amount is capped at R30 000. their members on how savings withdrawal claims will
be processed.
3 OF 4
WHAT SHOULD as possible – but keep in mind that you

will be giving up the amount drawn plus
YOU DO? all interest on that amount in retirement.
Plus, if you wait to withdraw money from
1. Please ensure that your retirement fund has
the savings component until retirement, it
your correct contact details. This is important
will attract less tax.
so that they can contact you about the reform.
• Consider whether you would rather transfer
2. Keep an eye out for communication from your
funds from your savings component to the
retirement fund administrator or the trustees
retirement component.
of the fund, as they need to communicate with
4. Do not let anyone pressure you to do anything
members about the implementation of the
that is not in your interest. While it is good to
reform.
help people when one can, you have worked
3. Carefully consider your options and seek advice
hard to save for retirement – and the longer it
from an accredited financial advisor.
remains invested, the better.
• Identify your long-term savings goals and
5. If you need help but do not know where to
plan for your future – and try to save as
start, contact your retirement fund.
much as you can when you can. Unforeseen
events may mean that you must adjust the
plan – but start with a plan. You will have SCAN QR CODE FOR
more flexibility than ever before – but that
comes with the responsibility to protect
MORE INFORMATION
yourself now and for the future.
• If you are a provident fund member that
was over the age of 55 on 1 March 2021,
then you have the option of structuring your
contributions to follow the two-pot design.
• If you have contributed to your retirement
fund over several years, you may have
access to a withdrawal from the seeding
capital on implementation. Do not make
hasty decisions to take a withdrawal. It may
be tempting to make a withdrawal as soon
Private Bag X115, Pretoria, 0001 | 40 Church Square, Pretoria, 0002 | Tel: +27 12 315 5111 | eMail: media@treasury.gov.za | www.treasury.gov.za
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FREQUENTLY ASKED QUESTIONS | 2024

The retirement component cannot be accessed on

For example, if you have a R200 000 fund WHAT IS NEXT

WHAT SHOULD as possible – but keep in mind that you

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