The Two-Pot Retirement System

The two-pot retirement system is part of the government's overall retirement reform program set to improve the retirement outcomes for all South Africans. The long-term goal of a retirement fund is to prioritise saving towards retirement, but the reform program allows members to access the saving portion of their retirement benefit only for unexpected expenses and during financial distress.

How does preservation fund withdrawal work with two-pot (prior to retirement)?

Preservation funds allow members to make one full or partial withdrawal before retirement age (early retirement age 55). However, the rules regarding the savings pot and additional withdrawals can be a bit nuanced:

  • Savings Pot Withdrawal: Under the current two-pot system, a member can make one withdrawal per tax year from the savings component. Once a member has taken this withdrawal there won’t be any further withdrawals available as no new contributions are being invested. If the member only withdraws a portion of their savings pot, they can withdraw the other portion(s) in subsequent years.
  • Once-Off Vested Pot Withdrawal: Members are also permitted to make one full or partial withdrawal from the vested pot in the preservation fund before retirement age. This is separate from the annual savings pot withdrawal.
  • Retirement Pot: This pot remains invested and can only be accessed at retirement.

Whether a member has withdrawn from the Pension or Provident Fund prior to the transfer to the Preservation Fund has no impact on the rules applicable in the Preservation Fund, this is a separate product.

Are paid up members included in the two-pot system?

Yes, paid-up members will be included in the two-pot system.

Why was the two-pot retirement system implemented?

Since only 6% of South Africans can retire comfortably, the two-pot retirement system was created to alleviate financial stress by introducing improvements to retirement savings preservation as it provides a level of flexibility to accessing retirement savings when emergencies arise.

What is the two-pot retirement system?

The two-pot retirement system allows you to access funds allocated in a savings component and a retirement component, referred to as “pots”. The savings component is intended for unexpected emergencies that would include family emergencies, medical emergencies, urgent home repairs, legal issues and natural disasters. The retirement component is an “untouchable” component specifically created for preservation until retirement.

Who is the two-pot retirement system meant for?

The new system will apply to all retirement funds, that is, both private sector and public sector funds except for legacy retirement annuity policies, or funds with no active participating members. Pensioners and members of provident funds who were 55 years and older on 1 March 2021 who have not opted to be part of the two-pot system will also be excluded.

How can we 10X Your Future?

Begin your journey to a secure future with 10X Investments. Explore our range of retirement products designed to help you grow your wealth and achieve financial success.