Two-pot system
Changes to retirement funds from 1 September 2024.
National Treasury has been making changes to retirement fund rules for many years. The latest change is the implementation of the “two-pot system” or “two pot” that came into effect on 1 September 2024. The purpose of this system is to improve financial security and encourage long-term retirement savings.
what is the purpose of the two-pot system?
The two-pot system aims to balance the need for long term saving but with some earlier access in the event of severe financial distress. There are two main purposes:
1
To encourage the use of savings for retirement by only allowing access to the retirement component at retirement and only for the purpose of buying an annuity (or pension).
2
To enable access to the savings component in the event of a desperate financial emergency, one where you have no other option, without having to resign from employment.
overview of the changes
Up to 31 August 2024, you had one pot of money for your retirement savings, called the “vested pot”. Your vested pot will be closed from 1 September 2024 and no further contributions will be allocated to this pot. The money you’ve saved in your vested pot will be invested and will keep growing with investment returns until you leave your employer or retire.
READ MORE about the changes and how these changes will impact you.
From 1 September 2024 your monthly contributions will be split into 2 pots
One‑third of retirement contributions into the future plus investment returns (whether positive or negative)
Two-thirds of retirement contributions into the future plus investment returns (whether positive or negative)
savings withdrawal benefit
You can claim a savings withdrawal benefit without having to terminate service.
You are allowed to make one cash withdrawal from your savings component in a tax year (the tax year starts on 1 March and ends on 28 February in the next year). The following conditions apply to any savings withdrawal benefit:
■ The minimum withdrawal amount is R2 000 (before deductions)
■ There is no maximum limit on the amount that can be withdrawn once per tax year
■ SARS will deduct tax from any amount that you withdraw at the highest tax rate that applies to your last Rand earned (i.e. your marginal tax rate).
The individual tax tables (also referred to as tax at your marginal rate) for the current tax year, March 2024 to February 2025, is set out below:
■ If you have arrear taxes owing to SARS, SARS will instruct the Fund to pay the amount owed to SARS including the tax due on the savings withdrawal benefit claim, which may result in the amount paid being significantly reduced, or the entire amount that you are claiming, being paid to SARS.
■ After the claim has been processed, an IRP5 will be issued to you reflecting the tax paid on the savings withdrawal benefit claim.
A transaction fee is charged for processing a savings withdrawal benefit claim. The following fee applies and is payable to Alexforbes:
■ Withdrawals between R2 000 and R5 000 will incur a minimum fee of R100.
■ Withdrawals between R5 000 and R30 000 will incur a fee of 2% of the pre-tax withdrawal amount.
■ Withdrawals above R30 000 will incur the maximum transaction fee of R600.
process to claim your savings withdrawal benefit
To submit a Savings withdrawal claim, please log in to the Alexforbes online platform, AF Connect. No manual claims will be accepted.
If you need a reminder or more information, please visit the Alexforbes My Money Matters webpage, https://mymoneymatters.alexforbes.com for the latest information available. The webpage provides you with brochures, short videos and answers to important questions.
over 55 years as at 1 march 2021
You may recall that on 1 March 2021 the law changed for provident fund members and retirement savings of provident fund members were required to be split into two sub accounts:
Savings built up to 28 February 2021 became the “vested benefit” and
Contributions made from 1 March 2021 were directed to the “non‑vested benefit”
The purpose of this change was to require provident fund members to buy a pension with at least two‑thirds of their retirement savings held in the “non‑vested benefit”.
However, if you were 55 years or older on 1 March 2021 this change did not affect you. Your contributions made from 1 March 2021 continued to be allocated to your vested benefit. The result is that you only have a vested benefit.
