What You Need To Know

President Cyril Ramaphosa on 01 June 2024 signed into law the Revenue Laws Amendment Bill of 2023, which establishes a “two-pot” system that gives members of retirement funds access to retirement savings without having to resign or cash out entire pension funds.

The amendment law introduces a “two-pot” retirement system to address the concerns related to lack of preservation before retirement and lack of access to retirement funds by households in financial distress.

 

What is Two-Pot Retirement System?

The Two-Pot Retirement System allows you to withdraw a modest amount of your retirement savings (before retirement) for emergencies. The majority of your retirement savings will be “preserved,” which means you will need to keep them invested until you retire.

 

Who is it for?

  • Any South African who has a pension fund, provident fund, retirement annuity, or preservation fund.
  • If you have a provident fund and you were over 55 years old on 1 March 2021 you can continue with the old system or switch to the new one.

 

How does the Two-Pot Retirement System work?

From 1 September 2024, your retirement contributions will be divided into two pots:

 

How does the Two-Pot Retirement System work?

From 1 September 2024, your retirement contributions will be divided into two pots:

Saving Pot: One-third of your contributions will be allocated to a savings pot, which can be accessed before retirement if required. You can use this component once every tax year for an emergency. The minimum withdrawal amount is R2,000, which will be taxed at your marginal income tax rate. You will also need to pay a processing fee.

Retirement Pot: The remaining two-thirds of the retirement pool will be used to fund retirement income. This pot will be preserved until the retirement date.

 

A one-time automatic allocation of 10% of your existing retirement savings (up to R30,000) will be moved to the “savings pot” as an initial or opening value. This money will be protected, and the two-pot rule will not apply. 10% of your retirement savings or R30 000, whichever is the lowest, will be transferred to the savings component.

 

The two-pot system is set to change the future of retirement planning in South Africa.

 

Get in touch with one of our consultants to discuss retirement planning or to learn more about the Two-Pot Retirement System.

Call us now on 011 768 6406 | Email: info@moso.co.za | Whatsapp: 066 351 6820