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When will the 2-pot system be released.
From 1 September 2024, your retirement savings will be split into a vested, savings, and retirement component. The vested component will be made up of your retirement savings on 31 August 2024. You’ll have access to a cash portion (savings component) while preserving the rest for retirement (retirement component).
What is Two-Pot Retirement System?
The Two-Pot Retirement System enables you to access a small portion of your retirement savings (before you retire) for emergencies. The bulk of your savings will remain “preserved”, meaning you will have to keep the majority of your retirement savings invested until you retire.
Who is it for?
Any South African who has a pension fund, provident fund, retirement annuity, or a preservation fund.
If you have a provident fund and you were over 55 years old on 1 March 2021 you can continue with the old system or adopt the new one.
The Two Pot System marks a significant change to South Africa’s retirement landscape. It’s designed to provide you with a safety net in times of financial crisis while encouraging long-term savings.
All your future contributions to your retirement fund will be split into two pots: a savings pot and a retirement pot. Your current retirement savings until 31 August 2024 will remain preserved in a vested pot.
Simplifying the two-pot system
Why is the government implementing the two-pot system?
- So South Africans can retire more comfortably.
- Government wants us to become a nation of savers, but they understand that members of funds have emergencies as well. For this reason, you can access some of your retirement savings in an emergency without leaving your current employer.
- The proposed date of implementation is 1 September 2024.
Your retirement savings in your Fund will be divided into 3 components, a vested, savings and retirement component. Different rules apply to each component.
Retirement savings on 31 August 2024
Your Fund will do a once-off compulsory transfer of 10% of your retirement savings on 31 August 2024 or R30 000, whichever is the lowest to the savings component. The rest of the money will remain in your vested component.
Retirement contributions from 1 September 2024
Your retirement contributions will be split into 2 components. • One third to your savings component, and two thirds to your retirement component.
Savings component calculator
When the two-pot retirement system comes into legislation on 1 September 2024, you can withdraw from your savings pot in case of emergencies. However, it’s usually better to keep this money invested – if you don’t withdraw, you’ll have more savings by the time you retire than if you do.
Use our savings component calculator to see how your savings could grow if you keep them invested. It will help you understand the potential benefits of leaving your money invested.
What is the two pot retirement system?
From the proposed date of implementation on 1 September 2024, the two-pot system will change the future of retirement planning in South Africa.
Here’s what you need to know:
- The vested component: This component is made up of your retirement savings on 31 August 2024. This money will be protected, and the two-pot rules will not apply to it. 10% of your retirement savings or R30 000, whichever is the lowest, will be transferred to the savings component.
- The savings component:One third of your contributions from 1 September 2024 will go into your savings component. You can tap into this component once every tax year for an emergency. The minimum withdrawal amount is R2 000 and will be taxed at your marginal income tax rate. You will also pay a processing fee.
- The retirement component: Two thirds of your contributions from 1 September 2024 will go into your retirement component. You can only access this component at retirement and must use it to buy a pension.
Two-Pot retirement system calculator is now available
The calculator will assist pension fund members with an illustrative amount of what they can possibly expect as a payout. All relevant and accurate information must be provided to get a clear estimate of the payout. See the two-pot calculator here.