2 POT RA SYSTEM Two-Pot Retirement System | What You Should Know | Sanlam

From 1 March 2024, your retirement contributions will be divided into three components (previously referred to as pots). The idea is to empower more South Africans to preserve their retirement savings when changing or leaving a job, while also allowing people to access their savings component if they experience financial hardship.

In future, one-third of your contributions will go to your savings component and is accessible before retirement.

This savings component will also receive a once-off seed capital boost from the vested component of your retirement fund (10% of your fund balance, up to R25,000). Also see the question regarding the ‘vested component’ below.

The remaining two-thirds of future contributions will go into a retirement component, which you cannot access until retirement.

If you contribute R3,000, for example, R2,000 will go to your retirement component, and R1,000 will go to your savings component.

Important: The above applies to future contributions and excludes all contributions you have made up until 29 February 2024.

These are all the funds that accumulated in your retirement fund up until 29 February 2024. The rules that apply to these funds will remain the same as under the current retirement fund legislation.

For example:

• For retirement annuities, you will not be able to access any funds until you retire
• For pension and provident funds, the vested component will still be exempt from compulsory preservation, so you can withdraw a taxable lump sum should you resign or be retrenched

Note that to provide initial seed capital for your savings component, 10% of your fund balance (capped at R25,000) will be transferred from your vested component. For example, if your fund has R30,000 in it, R3,000 will be transferred to your savings component.

Yes, you can, however, there are limits in terms of the amount and the number of times you can withdraw. You can make one withdrawal per tax year and you need a balance of at least R2,000 in the savings component before you can make a withdrawal.

For pension funds and provident funds, if you are retrenched you will be able to access all the funds in your vested component as well as your accumulated savings in the savings component. For retirement annuities, you will only be able to access your savings component.

All withdrawals from the savings component are added to your taxable income and will be taxed at your marginal tax rate.

If your annual income is R300,000, for example, your marginal tax rate according to the 2023/24 income tax table will be 26%. That means that if you withdraw R10,000 from your savings component, R2,600 will be deducted from this amount and paid to SARS.

Yes, it can matter for provident fund members. On 1 March 2024, provident fund members who were 55 years or older on 1 March 2021, can opt to either:

• Contribute to the vested component (until you retire or leave the fund), or
• Participate in the two-pot retirement system and split all new contributions between savings and retirement components. Then you will no longer be able to contribute to the vested component.

Your retirement annuity policy will be exempt from the two-pot retirement system if it is a legacy policy that conforms to specific characteristics in the draft legislation.

We encourage our clients to only access their retirement savings as a carefully considered last resort. It’s crucial to contribute regularly to retirement savings and to capitalise on the magic of compound interest as much as possible. When going through financial difficulties, we urge you to seek financial guidance from a trusted financial adviser to make the optimal decision that will serve you now, and in the long term.