1. What is the implementation date for the Two-Pot Retirement System?
You will be able to submit request to withdraw from 1 September 2024. Thereafter only one withdrawal from the savings pot can be made per year.
2. What is the Two-Pot Retirement System?
The Two-Pot Retirement System is a new legislative framework introduced by the South African government. The Two-Pot Retirement System will allow retirement fund members to have access to the portion of their retirement savings before termination of their fund membership. This will come into effect as of 1 September 2024. This means that the member of a fund will have three components to their retirement savings record, and these are:
3. How does the Two-Pot Retirement System work?
The vested component:
This is the component of the members contributions which constitute the member’s individual account as per section 14B of the PFA, and which was accumulated before 1 September 2024. This component remains as is and is governed by the rules as we know them before the Two-Pot Retirement System.
The retirement component:
From 1 September 2024 onwards, the retirement component will be made up of two-thirds of the member’s contributions. And this component can only be accessed at retirement, even if the member changes employers or withdraws from the Fund.
The savings component:
This component will be funded by one third of the member’s contributions as from the 1 September 2024. This pot can only be accessed once during a tax year, subject to a minimum withdrawal amount of R2000. The initial savings amount to be invested in the savings account will come from the existing fund credit or minimum individual account of the member accumulated before 1 September 2024.
4. How much of the retirement savings can be withdrawn by the member from 1 September?
Once-off withdrawal: From 1 September, you will be able to withdraw whichever is lower between 10% of the retirement savings and R30 000.
Annual withdrawals: You will be able to withdraw a minimum withdrawal amount of R2000. To be able to withdraw the minimum of R2000 your fund credit in your vested pot must be equal to R20 000.
If the fund credit in your vested pot is less than R2000 on 31 August 2024 you will not be able to make a savings withdrawal now. You will have to wait until your Savings component has accumulated at least R2000 as this is the minimum amount you may withdraw once a tax year.
5. How does the Two-Pot Retirement System affect my current fund credit?
The fund credit of current members as at 31 August 2024 will be ring-fenced and may still be taken in cash at resignation, dismissal and retirement.
6. Does the Savings Pot gain interest?
If you choose not to withdraw your Savings Pot money it will continue to grow. You can then withdraw it as cash when you reach retirement.
7. What happens at retirement?
The Vested Pot and the balance in the Savings Pot can be taken in cash. The Retirement Pot must be used to buy a pension for life.
8. What happens in the case of retrenchment?
If you leave your employer before retirement through resignation, retrenchment or dismissal, you can access your vested component as well as your savings component as a cash lump sum (tax will apply).
9. What is the withdrawal process?
The Fund currently has two withdrawal options:
Online Claims Process:
Here's How to Get Started:
Registration Process:
Steps to claim online for the Savings Component of the Two-Pot System:
Manual Claims Process:
10. What documents are required to claim?
The following documents will be required to complete a claim:
11. What are the implications for members aged 55?
Furthermore, members who were 55 years or older on 1 March 2021 and who remained members of the Fund until 1 September 2024 can elect whether to participate in the Two-Pot Retirement System or remain as contributing members according to the pre-1 March 2021 regime. Members must opt-in within 12 months from 1 September 2024. If members do not opt into the two-pot retirement system but transfers into another fund after 1 September 2024, then they will automatically be in the Two-Pot Retirement System.
12. Are there any tax implications to consider with this system?
Withdrawals from the Savings Pot before retirement are subject to marginal tax rates. This means that the amount withdrawn is taxed according to the individual's income tax bracket. The tax rates can vary based on the total income, including the withdrawn amount. Members should consider the potential tax consequences when making withdrawals from the Savings Pot.
13. Will my money continue to grow under the Two-Pot Retirement System?
Your money will continue to grow, each pot will be allocated with the Fund’s growth, you will be able to track the growth of each pot from your benefit statement.
14. Can I still take the rest of my money in cash when I leave my work or If I am retrenched?
No, when you resign or are retrenched, you will not be able to take any amounts in your retirement savings pot, however, you will only be able to take the amounts in your vested pot, plus any amount in your savings pot. The retirement pot will remain closed until you reach early retirement or normal retirement.
15. Who is the Two-Pot Retirement System suitable for?
Long-term Investors:
Individuals with a long investment horizon (typically 10 years or more) may benefit from the growth potential of riskier assets in one pot, while having the security of savings investments in the other.
Risk-Averse Investors:
Those who are risk-averse or nearing retirement may find comfort in having a conservative pot that prioritizes capital preservation and a stable income stream.
16. Can I opt out of the Two-Pot Retirement System if I do not want to participate?
Only members that were 55 years in 1 March 2021 will be allowed to choose if they want to opt-in or opt-out, all members that were younger than 55 in 2021, will form part of the new Two-Pot Retirement System.
17. How will my future retirement savings be impacted by the Two-Pot Retirement System?
If you do not withdraw from your savings pot, and you leave your money for your retirement, it will be taxable as a lump sum benefit, as per the retirement lump-sum tax table. This tax deductions are significantly lower than the marginal tax rate, and this will give you more cash at retirement.