Finance: Two-Pot Retirement Unpacked
Nicolette van Vuuren | Senior Associate at Webber Wentzel
The Two-Pot Retirement System enables you to access a small portion of your retirement savings (before you retire) for emergencies. The bulk of your savings will remain “preserved”, meaning you will have to keep most of your retirement savings invested until you retire.
Any South African who has a pension fund, provident fund, retirement annuity, or a preservation fund.
If you have a provident fund and you were over 55 years old on 1 March 2021 you can continue with the old system or adopt the new one.
From 1 September 2024, your retirement contributions will be divided into two pots:
A savings pot where one-third of your contributions will be allocated and which you will be able to access before retirement if required, andA retirement pot, where the remaining two-thirds will be kept for funding your income in retirement. This pot will be preserved until the retirement date.There will be a once off automatic allocation of 10% of your existing retirement savings (capped at R30 000) transferred to the "savings pot" as an opening value.
The new rules will only apply to new contributions after 1 September 2024 for Two-Pot Retirement System. Retirement savings up to that date will be ringfenced as the "vested pot", and the existing rules will continue to apply.
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