South Africa’s retirement landscape underwent a major transformation with the introduction of the two-pot retirement system, effective from 1 September 2024. This reform aims to strike a balance between long-term financial security and short-term financial flexibility for retirement fund members.
What Is the Two-Pot System?
Under the new system, retirement contributions are split into two main components:
- Savings Pot (1/3 of contributions): This portion is accessible before retirement, allowing members to withdraw funds in times of financial need. Withdrawals are subject to tax and require approval from the South African Revenue Service (SARS).
- Retirement Pot (2/3 of contributions): This portion remains preserved until retirement, ensuring that members maintain a foundation for their future financial well-being.
- A third component, known as the vested pot, contains all retirement savings accumulated before the system’s implementation and remains governed by the previous rules.
Special Provision for Members Aged 55 and Older
Members who were 55 years or older as at 1 March 2021, a member of the Sanlam Umbrella Provident Fund, and are still a member of that fund, as of 1 September 2024 and did not automatically convert to the two-pot system. These individuals may opt-in to the two-pot retirement system at any time before 31 August 2025. Please refer to previous communication that was distributed to members informing them of this option, here.
This opt-in provision allows older members to benefit from the flexibility of the savings pot (which provides access to some of their retirement savings before retirement) while continuing to preserve their retirement savings. It’s a one-time decision that should be made with careful consideration of personal financial needs and retirement goals. It is important to note that once this option is exercised it is irreversible and may impact on how members can take their benefit at retirement.