The two-pot retirement system allows you to access a portion of your retirement savings for emergencies while preserving the majority for your golden years.
As of 1 September 2024, all retirement contributions are automatically divided into two pots:
The two-pot system will apply to most fund members, with just a few exceptions. Excluded from the two-pot party:
You continue contributing to your retirement fund as you did before the introduction of the two-pot-retirement system. The biggest difference is that, as of 1 September 2024, your contribution is automatically split into the two new pots.
When the system was introduced, 10% of the existing retirement savings you accumulated before 1 September 2024 was taken from your existing savings (the vested pot) and moved into the savings pot, to get you started. This is called ‘seeding’ and is capped at R30 000. The remaining funds were housed in the vested pot.
You can withdraw funds from your savings pot, once every tax year, but only if you have more than R2 000 available in your savings pot, and you have to withdraw at least R2 000. But remember, you will be taxed on this money at your marginal tax rate, if you withdraw it before retirement.
Saving for your retirement is important but we understand that sometimes, life happens. This is why the two-pot retirement system was introduced - to give you access to a portion of your retirement savings should you really need it.
Consider why you are making a withdrawal, and what the effect will be on your retirement savings
Complete the savings component withdrawal form
Submit the form to claims@fedgroup.co.za
In short, the two-pot system offers some flexibility, but it comes with its own set of rules and timelines, so be prepared and plan ahead. And remember: just because you can access a portion of your retirement savings, doesn’t mean you should.
The two-pot retirement system is designed to give retirement fund members a bit of financial breathing room during tough times without requiring them to resign from their jobs in order to access their savings.
Remember: accessing your retirement funds early not only means you have less available at retirement, it also impacts your tax-free savings portion, and the ability of your retirement funds to benefit from compound interest and grow at a rate that will ensure you have enough to retire comfortably.
We spoke to industry experts about these considerations and more, in our two-pot podcast.
Not sure how to navigate the new two-pot retirement system? Speak to our team and we’ll walk you through it.
