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With the introduction of the Two-Pot Retirement System, South Africans with pension funds, provident funds, retirement annuities, or a preservation fund are facing a new era. This system affects how retirement funds are accessed both in South Africa and for South African expats living abroad.
What Changes Are Coming for South African Retirement Funds?
South Africa’s National Treasury has implemented a major reform for retirement funds such as pension funds, provident funds, retirement annuities and preservation funds. As of 1 September 2024, compulsory partial preservation now becomes applicable to all retirement funds held.
The intention is to allow South Africans access to necessary funds, in case of emergencies, when fund members require access to retirement funds before normal retirement age has been met.
How the Two-Pot Retirement System Impacts Retirement Funds
The Two-Pot Retirement System enables fund members to access a small portion of their retirement savings (before they retire) for emergencies. The bulk of their savings will remain “preserved”, meaning they will have to keep the majority of their retirement savings invested until they reach retirement age.
This is applicable to any fund member who has a pension fund, provident fund, retirement annuity, or a preservation fund.
From 1 September 2024, retirement contributions will divide members’ benefits into two separate pots::
- A Savings Pot where one-third of contributions will be allocated and which you will be able to access before retirement if required, and
- A Retirement Pot, where the remaining two-thirds will be allocated. 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.
Savings Pot 1/3 |
Retirement Pot 2/3 |
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How South African Expats Can Access Retirement Funds Under the Two-Pot System
Since 1 March 2021, a significant change took place in the financial emigration process that allowed South African expats to access their retirement funds before maturity, provided you have been a tax resident of another country for a consecutive period of at least three years.
This is achieved through the process known as Tax Emigration. Tax emigration is when you change your residency status for tax purposes and Exchange Control Status to that of emigrant/non-resident.
This process will still apply to South African emigrants to access the two thirds Retirement Pot. However, the Savings Pot portion can be accessed without completing the process of Tax Emigration.
The Two-Pot Retirement System offers flexibility for South Africans and expats with pension funds, provident funds, retirement annuities or a preservation fund. It's important to understand how these changes will impact your retirement funds. Get expert advice on how to access your funds and navigate the new system.
The information provided in this article and on this website is intended for general informational purposes only. It is not a substitute for professional advice, whether financial, legal, or otherwise. Before making any decisions or taking any actions based on the information provided on this site, we strongly recommend consulting with qualified professionals who can assess your specific circumstances and provide tailored guidance.
