The two-pot retirement system, introduced in September 2024, is the biggest change to retirement savings in South Africa in decades. It splits your retirement fund contributions into two pots: one you can access before retirement and one you cannot. Here is how it works and what it means for you.
How the Two-Pot System Works
From 1 September 2024, all new contributions to retirement funds are split:
- Savings pot (one-third): You can withdraw from this once per tax year before retirement
- Retirement pot (two-thirds): Locked until you retire, preserved to provide an income in retirement
- Vested pot: Your existing balance as at 31 August 2024, still under the old rules
Seed Capital
When the system started, 10% of your vested balance (up to R30,000) was moved into your savings pot as “seed capital.” This is the first amount you can access.
How to Withdraw from Your Savings Pot
- Contact your retirement fund administrator (your employer’s HR or the fund directly)
- Submit a withdrawal claim (most funds have online portals or forms)
- Minimum withdrawal is R2,000
- You can only withdraw once per tax year (March to February)
- The fund processes the claim within 5 to 10 business days (some take longer)
- Tax is deducted before the money reaches your bank account
Tax on Withdrawals
Savings pot withdrawals are taxed as income at your marginal tax rate. This is the same rate as your salary. The brackets below are for the 2025/2026 tax year (check SARS for the latest):
| Annual Taxable Income | Tax Rate |
|---|---|
| Up to R237,100 | 18% |
| R237,101 to R370,500 | 26% |
| R370,501 to R512,800 | 31% |
| R512,801 to R673,000 | 36% |
| R673,001 to R857,900 | 39% |
| R857,901 to R1,817,000 | 41% |
| Over R1,817,000 | 45% |
If you earn R300,000 per year and withdraw R30,000 from your savings pot, that R30,000 is added to your income and taxed at your marginal rate (26% in this bracket). You would receive approximately R22,200 after tax.
Should You Withdraw?
In most cases, no. Here is why:
- You lose compound growth: R30,000 left in your fund for 20 years at 10% growth becomes R200,000+
- You pay tax immediately: Up to 45% of the withdrawal goes to SARS
- It is meant for emergencies: Not holidays or wants
Consider withdrawing only if you are facing genuine financial distress: risk of losing your home, medical emergency, or severe debt that is accruing interest faster than your fund is growing.
What Happens When You Change Jobs?
Under the two-pot system, your retirement pot must be preserved when you change jobs. You can no longer cash out your full retirement fund when resigning. Your savings pot balance can be withdrawn (once per year), but the retirement pot transfers to your new employer’s fund or a preservation fund.