June 5, 2024

Two-pot retirement reform: What members need to know

The South African retirement fund industry will shortly be undergoing a significant change with the introduction of the new two-pot retirement reform proposals.
National Treasury has published draft legislation to give effect to these proposals. It is envisaged that once the legislation is promulgated, the effective date for these changes will be 1 September 2024.


The two-pot reform will change how fund members can access assets in their retirement funds and aims to achieve two objectives:


  1. To allow fund members not yet retired access to a portion of their retirement assets in times of acute financial stress.
  2. To improve long-term preservation of retirement assets until fund members retire.


New contributions to retirement funds will be split into two pots from 1 September 2024:


1/3 Saving Component
2/3 Retirement Component


1/3 Saving Component


Seed capital from Vested component

  • 10% of member’s fund value on 31 August 2024 (capped at R30 000)
  • Transferred as ‘seeding capital’ starting balance


Effective 1 September 2024, members will be able to withdraw amounts before retiring from the specific retirement fund.



  • Limited to one per tax year
  • Minimum amount of R2 000
  • Taxed at the member’s marginal income tax rate


Retirement fund administrators have to apply for a South African Revenue Service (SARS) tax directive and withhold the required amount of income tax, before paying the remaining amount to the fund member.



  • Benefits remaining when the member retires can be withdrawn (partially or in full)
  • Taxed according to retirement lump sum table*


*This will take into account previous retirement fund lump sums received but excluding withdrawals from the Savings component. Any remaining balance in the Savings component at retirement may be added to the Retirement component and used to purchase an annuity.


2/3 Retirement Component


Important info

  • Cannot be accessed by members as cash withdrawals
  • Total benefit value must be used to provide an annuity at retirement


Some exceptions

  • If benefit amount is below a certain minimum
  • Or if the member becomes non-SA tax resident and remains so for a period exceeding 3 years


Retirement fund benefits that accrue to members prior to 1 September 2024 will be separately preserved:


Vested Component


Vested Component


Important info

  • Members’ current rights will remain protected and the legislation as it exists currently will continue to apply
  • Members of preservation funds who have not accessed their once-off withdrawals, will still be permitted to do this at any time in the future
  • On retirement, the member will be able to take up to 1/3 of the balance in the Vested component as a lump sum and use the balance to purchase a compulsory annuity
  • Any lump sums received on retirement taxed according to the retirement lump sum table*
  • Rules that apply to vested provident fund benefits (pre-1 March 2021 contributions plus growth) will continue to apply
  • Members who have been non-SA tax resident for a continuous period of 3 years+ can withdraw funds in the Vested component**


*This will take into account previous retirement fund lump sums received but excluding withdrawals from the Savings component.

**The withdrawal tax table will be applicable to such a withdrawal, taking into account previous retirement fund lump sums received but excluding withdrawals from the Savings component.


Excluded: Provident fund members over 55 years on 1 March 2021 (they may opt in)


How will the two-pot system affect provident fund members who were 55 years or older on 1 March 2021?


These members will not automatically form part of the two-pot system. Their current rights in respect of their fund benefits will remain protected and the legislation as it exists currently will continue to apply. However, they may choose to participate should they wish to do so.
Such members will need to submit an ‘opt-in instruction’ to their provident fund administrators. If a member has opted into the two-pot system, they cannot reverse their decision.


Key milestones need to be achieved before the two-pot system can be implemented


In order for the above changes to be implemented and for members to have access to funds in their Savings component:


  • the draft legislation must be promulgated;
  • the fund’s administrator has to finalise the necessary system changes; and
  • the Financial Sector Conduct Authority (FSCA) will need to approve the retirement fund’s rule amendments.


Furthermore, SARS will have to be ready to process the tax directive applications required for withdrawals from the Savings components.

Please note that further changes may be made to the draft legislation before it is promulgated. We will keep you informed of any significant changes, as well as when the amendments to the Ninety One retirement funds’ rules have been approved by the FSCA.

Although the above changes will allow retirement fund members more opportunity to access their retirement fund savings, we would still like to encourage members to preserve these savings for as long as possible. Should a member consider withdrawing from their Savings component, it is important to obtain advice from their financial advisor first, as such a withdrawal may impact their planning for retirement and their ability to retire comfortably.