How the Two-Pot System Works — Step by Step
A simple, clear explanation of South Africa's two-pot retirement system for pension, provident, and RA members.
The 5 Steps of the Two-Pot System
Every contribution is split from 1 Sep 2023
From 1 September 2023, every rand you contribute (and your employer contributes) to a pension fund, provident fund, or retirement annuity is automatically split: 1/3 goes to the savings pot, 2/3 goes to the retirement pot.
Seed capital was added on implementation
On 1 September 2023, a once-off seed capital amount — the lesser of 10% of your fund balance or R30,000 — was transferred from your vested component to your savings pot. This gave everyone immediate access.
Old balance stays protected (vested component)
Money accumulated before 1 Sep 2023 is ring-fenced in a vested component under the old rules. It's untouched by the two-pot structure and can still be accessed on resignation under the old withdrawal rules.
You can withdraw from the savings pot — with tax
Once per tax year (March–February), you can apply to withdraw from the savings pot. Minimum R2,000. Your fund requests a tax directive from SARS, deducts the tax (at your marginal rate), and pays the balance to you.
The retirement pot stays locked until 55+
The retirement pot cannot be accessed before retirement. At retirement (age 55+), it must be used to buy an annuity (life annuity or living annuity). This ensures you have income in retirement.
Real Example — How Your Monthly Contribution Is Split
Scenario: You earn R25,000/month, contribute 7.5% (R1,875/month), employer contributes 7.5% (R1,875/month) = R3,750 total monthly contribution
After 12 months: savings pot ≈ R15,000–R16,000 (with growth). You can withdraw up to this amount once per tax year.
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