The Two-Pot Retirement System is designed to offer employees greater flexibility and security in managing their retirement savings.
This innovative approach splits retirement contributions into two distinct pots:
- Savings Pot: Accessible during the employee’s working life for emergencies or significant life events, offering flexibility and financial security.
- Retirement Pot: Reserved exclusively for post-retirement, ensuring long-term financial stability and support.
Of South Africans are not able to retire comfortably
Of South African retirees can't make ends meet.
How it Works
In South Africa, retirement savings pose significant challenges, and there are notable gaps in life, disability, and other group risk insurance coverage. At ASI, we provide impartial and expert guidance across all facets of retirement vehicles.
Frequently Asked Questions (‘FAQ’)
From 1 September 2024, your retirement savings will be divided into three components:
- Vested Component: Your accumulated retirement savings up until 31 August 2024 will go into this component.
- Savings Component: One-third of your future contributions will go here, receiving a one-time boost from the vested component (minimum 10% of the retirement fund value on 31 August 2024, up to R30 000). It will continue to grow with investment returns.
- Retirement Component: The remaining two-thirds of new contributions will be allocated here and cannot be accessed until retirement. These savings will be used to purchase a retirement income unless legislated minimum values apply.
For example, if you contribute R3 000 monthly, R2 000 will go to the retirement component, and R1 000 will go to the savings component. Access to the savings component is available once it reaches a minimum balance of R2 000, excluding contributions and the one-time booster made before 31 August 2024.
All retirement savings accumulated until 31 August 2024 will be governed by the existing rules. These savings will be part of the vested component, maintaining their current regulatory conditions.
For example:
- Retirement Annuities: Cannot be accessed until retirement.
- Pension and Provident Funds: The vested component is exempt from compulsory preservation, allowing withdrawal of a taxable lump sum upon resignation, dismissal or retrenchment.
- Preservation Funds: Current rules and vested rights will continue to apply.
These regulations ensure your accumulated savings remain protected and accessible under the conditions you’re familiar with.
Yes, legislation permits access to your savings component starting from 1 September 2024. However, there are minimum limits on the amount and the frequency of withdrawals. The exact date you can make your first withdrawal depends on the specific retirement fund you belong to.
Your vested component will serve as the initial capital for your savings component. On 31 August 2024, 10% of your fund balance (capped at R30 000) will be allocated to your savings component. You need a minimum balance of R2 000 in this component before you can make a withdrawal.
For example, if your fund has R30 000 on 31 August 2024, R3 000 will be transferred to your savings component.
Every withdrawal you make from your savings component is added to your taxable income and will be taxed at a fixed marginal tax rate at the time of withdrawal.
- For Pension Funds and Provident Funds, you will be able to access all the savings in your vested component and your accumulated savings in the savings component.
- For Retirement Annuities, you will only be able to access your savings component.
Yes, for Provident Fund members. From 1 September 2024 and onwards, Provident Fund members who were 55 years or older on 1 March 2021 can choose to participate in the Two-Pot Retirement System and split all new contributions between savings and retirement components. You will then no longer be able to contribute to the vested component. If you choose to participate in the Two-Pot Retirement System, from the month after you made your election, the Two-Pot Retirement System rules will apply.
Your retirement annuity will be exempt from the Two-Pot Retirement System if it is a legacy policy that conforms to specific characteristics in the draft legislation.
Please speak to your trusted ASI financial advisor to understand what the Two-Pot Retirement System means for you, specifically. Together, you can ensure that you stay on track to reach your retirement goals.