Understanding the two-pot retirement system
The two-pot retirement system aims to empower more South Africans to preserve their retirement savings when they leave a job or change employment while enabling controlled access to these savings in times of financial hardship.
At Sanlam, we are committed to empowering our clients to live confidently, securely, and prosperously. We want to help you make the best possible decisions to secure optimal outcomes for your financial future.
From 1 September 2024, the new two-pot retirement system will change how your retirement savings are administered. Here, we’ll help you understand these changes, and how you can make the most of your retirement savings.
- How it works
- Withdrawals
- FAQs
What you should know
- How it works
How the two-pot retirement system works
Receives two-thirds of contributions from 1 September and must be preserved until retirement. Funds must be used to buy a retirement income.
For example, if you contribute R3,000 monthly
R2,000 goes to the retirement component
R1,000 goes to the savings component
The illustration above is for information purposes only
The two-pot retirement system components explained
Making withdrawals from your savings component
- Withdrawals
How to apply for a withdrawal
- Register on Sanlam Secure ServicesFrom 1 September you will be able to view the values of the relevant components on each of your retirement plans on your benefit statement.
- Check your eligibilityEnsure that you have a minimum balance of R2,500 in your savings component or that you have not already made a withdrawal in the tax year. You have access to one savings withdrawal in a tax year. No prescribed maximum amount applies.
- Consider the impact of tax on your withdrawalYour net withdrawal amount will be taxed at your marginal tax rate. If you owe SARS any tax, it will also be deducted from your withdrawal amount before it is paid out to you.
- Complete the savings withdrawal request formGet the savings withdrawal request form via Sanlam Secure Services or email life@sanlam.co.za or WhatsApp on 0860 726 526 (select option 9).
- Submit your savings withdrawal request formSubmit your completed form to life@sanlam.co.za or via Sanlam Secure Services. Include your income tax reference number, annual income, residential address and copies of your ID as well as bank statement (not older than 3 months).
- Sanlam must request a tax directive from SARSWhen you’ve submitted your savings withdrawal form with all the valid requirements, we have to request a tax directive from SARS. Once this has been requested you cannot cancel your request to withdraw at this stage.
- Wait for processing and paymentYou will receive a confirmation letter when we have finalised your savings withdrawal request and the payment paid into your bank account.
What happens if I make a withdrawal from my savings component?
The withdrawal benefit will be taxed at your marginal tax rate, which will depend on your total taxable income in the tax year, including the withdrawal from the savings component. The income tax as well as any outstanding tax debt, will be deducted from the withdrawal benefit before it is paid to you.
Note: You can also do simulated tax calculations on the SARS website using their Two-Pot Retirement System Calculator. All results displayed are based on the data that you supplied and may change when your final tax directive is issued, or your next tax return is submitted. All relevant and accurate information must be provided.
More about retirement
Two-pot retirement system FAQs
How does the two-pot retirement system work?
From 1 September 2024, your retirement savings will be split into components (also referred to as pots). Your accumulated retirement savings until 31 August 2024 will go into the vested component, reduced with a once-off seeding to the savings component on 1 September 2024. One-third of future contributions will go into the savings component, and two-thirds will go into the retirement component. Effectively, all the components make up the retirement savings of your plan.Can I access any of my funds in the savings component from 1 September 2024?
Yes, you can. The two-pot retirement system allows one withdrawal from the savings component of a retirement savings plan per tax year. If you have more than one plan, you can make a withdrawal from each plan at different times during the tax year. A withdrawal can be made provided that the legal requirements and our conditions at the time are met. Currently, the minimum withdrawal amount is R2,000. You need a balance of at least R2,500 in your savings component before you can make a withdrawal.How will a withdrawal from the savings component be taxed?
Every withdrawal you make from your savings component is added to your taxable income and will be taxed at your marginal tax rate at the time of the withdrawal. For example, if your income – including the withdrawal – is R300,000 per annum, your marginal tax rate will be 26% according to the 2023/24 income tax table. This means if your net withdrawal amount is R10,000, you will receive R7,400 after the deduction of R2,600 income tax. Any outstanding tax debt as indicated by the South African Revenue Service (SARS) will also be deducted from the withdrawal amount before it is paid to you. The withdrawal amount will be included in your tax assessment for the tax year in which the withdrawal was made. Further tax may be payable, or a portion of the income tax paid reduced. There is no tax relief for withdrawals from the savings component.Can I change the payment allocation to the savings and retirement components?
No. The two-pot retirement system does not allow for anything other than the payment allocation to the savings component to be one-third and the retirement component to be two-thirds.
For example, if your monthly contribution is R3,000, your savings component will receive R1,000 and R2,000 will go to your retirement component.
Does my age matter?
Yes, it does matter if you are a provident fund and/or preservation provident fund member aged 55 years or older on 1 March 2021. For legislative reasons, you are not automatically included as a participant in the two-pot retirement system. However, you can opt in.
This opportunity is only available for 12 months from 1 September 2024. Once you have opted in, you cannot opt out again. If you do not choose to opt in within the 12-month period, your plan will remain unchanged and will not be impacted by the two-pot retirement system.