Quick Facts

• All retirement funds now follow the Two-Pot system from September 2024
• Tax benefits up to 27.5% of income (max R350,000 per year)
• Pension/provident funds are from your employer
• Retirement annuities are for self-employed or extra savings
• At least two-thirds must buy a pension when you retire

1. What Are These Retirement Funds?

Retirement funds help you save money for when you stop working. In South Africa, there are three main types. Each one works differently.

Pension Fund

Your employer offers this fund. You and your employer both pay money into it every month. The fund is managed by trustees who decide how to invest the money.

Provident Fund

This is also from your employer. It used to be different from a pension fund. But since March 2021, the rules are mostly the same. Both you and your employer pay into it.

Retirement Annuity (RA)

This is a personal retirement plan. You buy it yourself. It is not linked to your job. Anyone can open one. Self-employed people often use RAs.

⚠️ 2. The Two-Pot System (Started September 2024)

From 1 September 2024, all retirement funds in South Africa use the Two-Pot system. This affects everyone with a pension fund, provident fund, or retirement annuity.

How Your Money Is Split

The Vested Pot (Old Money):

• All money you saved before 1 September 2024
• 10% was moved to the Savings Pot (maximum R30,000)
• The rest stays in the Vested Pot
• Old rules still apply to this money

The Savings Pot (Emergency Money):

• Gets one-third of all new contributions from September 2024
• You can withdraw once per tax year (March to February)
• Minimum withdrawal is R2,000
• Taxed at your normal income tax rate
• No need to resign to access this money

The Retirement Pot (Locked Money):

• Gets two-thirds of all new contributions from September 2024
• Cannot touch until you retire
• Must be used to buy a pension when you retire
• Protects your retirement income

Important Rules

• You can only withdraw from Savings Pot once per tax year
• Each tax year runs from 1 March to 28 February
• Withdrawals are added to your salary for tax purposes
• If you earn R20,000 and withdraw R10,000, tax is calculated on R30,000

3. Pension Fund vs Provident Fund

These funds are very similar now. Here are the current rules for 2024-2025.

How They Are The Same

• Both are offered through your employer
• Your employer usually contributes to the fund
• Both follow the Two-Pot system from September 2024
• Both give you tax benefits
• At retirement, you must use at least two-thirds to buy a pension
• You can take up to one-third as cash when you retire

The Old Differences (Before March 2021)

Before 2021, provident funds let you take all your money as cash. Pension funds forced you to buy a pension with two-thirds. This changed in March 2021.

Special Rule for Older Provident Fund Members

If you were 55 or older on 1 March 2021 in a provident fund:

• Your old money (Vested Pot) can still be taken as full cash
• You can choose to join the Two-Pot system
• You have until September 2025 to decide
• Once you join, you cannot go back

4. Retirement Annuities (RAs)

A retirement annuity is a personal retirement plan. You buy it yourself. It is not linked to your employer.

Who Should Get an RA?

• Self-employed people (taxi drivers, spaza shop owners, hairdressers)
• Freelancers and contractors
• People whose employer does not offer a retirement fund
• Anyone who wants to save more for retirement
• People who want control over their investments

How RAs Work

Contributions:

• You choose how much to contribute each month
• You can increase or decrease contributions
• You can pause contributions if you need to
• You can make extra payments when you have money

Access to Money:

• From September 2024, RAs also follow Two-Pot rules
• You can withdraw from Savings Pot once per year
• Retirement Pot locked until age 55
• Cannot access before 55 (except special cases)

Special Cases for Early Access:

• Your RA balance is less than R15,000
• You become permanently disabled
• You leave South Africa for 3+ years (tax emigration)

Benefits of RAs

• Not linked to your job – stays with you if you change jobs
• Same tax benefits as employer funds
• You choose where to invest the money
• Flexible contributions – increase or decrease as needed
• Can pause if you lose your job
• Protected from creditors if you have debt problems

5. Side-by-Side Comparison

Feature	Pension/Provident Fund	Retirement Annuity
Who Offers It?	Your employer	You buy it yourself
Who Can Join?	Only employees of that company	Anyone – employed or self-employed
Employer Contribution?	Yes – employer also pays	No – you pay everything
Can You Change Contributions?	Usually fixed percentage of salary	Yes – increase, decrease, or pause
Two-Pot System?	Yes – from September 2024	Yes – from September 2024
When Can You Access?	Savings Pot: once per year Retirement Pot: when you retire or leave job	Savings Pot: once per year Retirement Pot: age 55 minimum
Tax Benefits?	Yes – up to 27.5% of income	Yes – up to 27.5% of income
Investment Choice?	Limited – trustees decide	More options – you choose
What Happens If You Change Jobs?	Must transfer to new fund or RA	Stays with you – no changes needed
At Retirement	Up to 1/3 cash, rest must buy pension	Up to 1/3 cash, rest must buy pension

✅ 6. Tax Benefits & Rules (2024-2025)

All retirement funds in South Africa give you tax benefits. This means you pay less tax when you save for retirement.

How Much Tax Can You Save?

You can deduct retirement contributions from your taxable income. The limit is:

• 27.5% of your annual income
• Maximum of R350,000 per year
• This applies to ALL your retirement funds combined

Tax on Withdrawals

Before Retirement (Savings Pot):

• Added to your normal income
• Taxed at your marginal tax rate
• If you earn R20,000 and withdraw R10,000, tax calculated on R30,000

At Retirement (Lump Sum):

• First R550,000 is tax-free (2024-2025)
• R550,001 to R770,000: 18% tax
• R770,001 to R1,155,000: 27% tax
• Above R1,155,000: 36% tax

Monthly Pension:

• Taxed as normal income
• Special tax rebates for people over 65
• Extra rebates for people over 75

Important Tax Rules

• All your lump sum withdrawals are added together for life
• This includes money from resignation, retirement, and death
• The R550,000 tax-free amount is for your whole life, not per fund
• SARS keeps a record of all your withdrawals

7. Which One Should You Choose?

If Your Employer Offers a Fund

• Join it immediately! This is usually compulsory
• Your employer contributes extra money
• This is free money – don’t miss it
• Better fees than individual RAs

If You Are Self-Employed

• Get a Retirement Annuity
• You need to save for your own retirement
• No employer will do it for you
• Start as soon as you can

If You Want to Save More

• You can have BOTH an employer fund AND an RA
• Many people do this
• Total contributions still limited to 27.5% or R350,000
• Good for people who earn well and want security

Choosing an RA Provider

When choosing where to buy your RA, look at:

• Fees: Lower is better – aim for under 1% per year
• Performance: Check past returns
• Flexibility: Can you pause or change contributions?
• Investment options: Do they match your risk appetite?
• Service: Can you reach them easily?

Popular RA Providers in South Africa:

• 10X Investments (low fees)
• Sygnia
• Allan Gray
• Old Mutual
• Sanlam
• Discovery
• Standard Bank
• Nedbank

🚨 8. Scams & Safety Warnings (2024-2025)

The Two-Pot system has created new opportunities for scammers. Be very careful.

Common Two-Pot Scams

1. Fake Withdrawal Services

• Scammers offer to help you withdraw from Two-Pot
• They ask for upfront fees (R500 to R2,000)
• They promise to get you more money than you have
• TRUTH: You can withdraw yourself for free through your fund

2. Phishing Messages

• SMS or email claiming to be from your retirement fund
• Links asking you to “verify” your details
• Requests to update banking details via a link
• TRUTH: Your fund will never ask for details via SMS link

3. Fake Fund Administrators

• People calling claiming to be from your retirement fund
• They say there’s a problem with your account
• They ask for your ID number, banking details, or OTP
• TRUTH: Real administrators never ask for OTPs over the phone

4. Advance Fee Fraud

• “Pay R1,000 now to unlock R30,000 from your Two-Pot”
• “We can get you early access for a small fee”
• “Bypass SARS tax with our special service”
• TRUTH: No one can bypass legal withdrawal rules

Employer Fraud Warning

Since September 2024, many employees discovered their employer was not paying into their fund:

• Money deducted from salary but not paid to fund
• No contributions for months or years
• Employees only found out when trying to withdraw

How to Protect Yourself:

• Check your annual benefit statement
• Register on your fund’s website or app
• Contact your fund directly if contributions seem low
• Report employer fraud to FSCA: 0800 110 443

How to Stay Safe

• Never pay anyone to help you withdraw – it’s free
• Never click links in SMS or email about your retirement
• Never share OTPs with anyone, even “administrators”
• Only use official fund contact numbers from your statement
• Verify all communications by calling back on official numbers
• Don’t trust promises to bypass tax or get more than your balance

Where to Report Fraud

• Financial Sector Conduct Authority (FSCA): 0800 110 443
• SABRIC (Banking Risk Centre): Report online at www.sabric.co.za
• SAPS: Report to your nearest police station
• Your fund’s fraud hotline: Check your benefit statement

Important Contact Numbers

Financial Sector Conduct Authority (FSCA)	0800 110 443 / www.fsca.co.za
South African Revenue Service (SARS)	0800 00 7ars (7277) / www.sars.gov.za
Pension Funds Adjudicator	012 346 1738 / www.pfa.org.za
SABRIC (Banking Fraud)	www.sabric.co.za
National Consumer Commission	0860 003 600

1. Start Now: The earlier you start saving for retirement, the more money you will have. Even R500 per month makes a big difference over 20 years.

2. Join Your Employer Fund: If your company offers a pension or provident fund, join immediately. Your employer contributes extra money – this is free money for your retirement.

3. Self-Employed? Get an RA: If you work for yourself, open a retirement annuity. No one else will save for your retirement. Compare providers and choose one with low fees.

4. Understand Two-Pot: You can access your Savings Pot once per year, but try to leave it unless it’s a real emergency. The more you withdraw now, the less you’ll have when you retire.

5. Watch Out for Scams: Never pay anyone to help you withdraw from Two-Pot. Never share OTPs. Always verify communications by calling official numbers.

6. Check Your Statements: Register on your fund’s website or app. Check that your employer is paying contributions. Contact your fund if something looks wrong.