Two-pot cheat sheet
24 August 2024
The two-pot retirement system kicks off on 1 September 2024, so let's address some of those unanswered questions.
You’ll pay an administration fee when you withdraw your funds
When you withdraw from your savings component, you will have to pay an administration fee for every withdrawal you make. The administration fee will be R300 (excl. VAT) and will be deducted before applying for tax.
Let's talk tax...
Marginal tax rates for the tax year ending 28 February 2025 which will be payable before withdrawing from your retirement fund:
| 18% | for taxable income below R237 100 |
|---|---|
26% | for taxable income above R237 100 |
31% | for taxable income above R370 500 |
36% | for taxable income above R512 800 |
39% | for taxable income above R673 000 |
41% | for taxable income above R857 900 |
45% | for taxable income above R1 817 000 |
You may find yourself in a higher tax bracket
Any withdrawal will be taxed in the same manner as a salary or other similar income. This means that you could be pushed into a higher tax bracket for the year of assessment as SARS will include the withdrawal when calculating your marginal tax rate.
You only get one withdrawal per tax year
Since the tax years run from March to February, even if you should do a partial withdrawal from your savings component, you will not be allowed to make another withdrawal until the following tax year.
What to consider before you withdraw...
Withdrawals could reduce your retirement savings
Accessing your savings component before retirement reduces the amount you will have available at retirement to purchase a retirement income product or to take as a cash lump sum.
What you see, is NOT what you get
Withdrawals from your savings component will be taxed at your marginal tax rate, which is the highest rate of tax that applies to you, according to the personal income tax table. You will receive the after-tax amount, less any outstanding taxes you may owe to SARS.
Note: These taxes are higher than those applied at retirement if you decide to take your savings component assets, or a portion thereof, as a cash lump sum at that point.
Let’s illustrate this in a scenario:
| Meet Zodwa | Meet Thabo | |
|---|---|---|
Take home taxable salary per year | R250,000.00 | R675,000.00 |
Marginal tax rate | 26% | 39% |
Amount in savings pot on 2 September | R5,000.00 | R20,000.00 |
Amount keen to withdraw | R4,000.00 | R18,000.00 |
Administrator fee | R300.00 | R300.00 |
Outstanding tax amount | R0.00 | R5,500.00 |
| Impact for Zodwa | Impact for Thando | ||
|---|---|---|---|
Initial claim | R5,000.00 | Initial claim | R18,000.00 |
Processing fee | R300.00 | Processing fee | R300.00 |
Less tax [(R 5 000.00 – R 300.00) x 26%] | R1,222.00 | Less tax [(R 18 000.00 – R 300.00) x 39%] | R6,372.00 |
Amount owing to SARS (IT88) | R0.00 | Amount owing to SARS (IT88) | R5,500.00 |
Final amount received after all the deductions | R3,478.00 | Final amount received after all the deductions | R 5,828.00 |
Work out your withdrawal amount with our two-pot calculator:
What two-pot means if you’re 55 and keen to opt in
If you have been a member of a provident fund since before 1 March 2021, and you were 55 or older on that date, you will automatically be excluded from the new system, and it will not have any impact on this specific investment. You will, however, be able to opt in if you would like to.
Should you choose to opt in, you will lose the ability to access 100% of your future accumulated funds in cash when you retire but you will still enjoy full access to your current savings accumulated before the new system takes effect.
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