How do the three-pot and two-pot systems work? How do I withdraw from my savings pot?

The long answer

If you are a member of a pension or provident fund, you will have three pots: the money that you have already saved up in your fund until 1 September 2024 (whether it’s a pension or provident fund) is your “vested” pot. The money that you contribute to your fund as of 1 September 2024 will be divided between two pots – your savings pot and your retirement pot.

You will be allowed to make one withdrawal per tax year of not less than R2,000 from your savings pot.

But as there will be no money in your savings pot on the 1 September 2024, there will be a once-off “seeding” where 10% of the money in your old vested pot will be transferred to the new savings pot. You can only transfer a minimum of R2,000, or a maximum of R30,000 in this seeding.

Neesa Moodley in a Daily Maverick article gives the following examples of how it will work:

• If you have R200,000 in your vested pot, R20,000 or 10% will be transferred to your savings pot.

• If you have less than R20,000, 10% will be less than the minimum R2,000 withdrawal, so nothing will be transferred to the savings pot.

After this initial seeding of the savings pot, your remaining contributions to the pension or provident fund will be split two-ways: one third will go to your savings pot and two-thirds to your retirement pot.

 You will not be allowed to withdraw any money from the retirement pot, even if you resign or lose your job. The money will be preserved to buy you a pension when you retire.

But as stated above, you will be allowed to make one withdrawal a year from the savings pot, and though it cannot be less than R2,000, you can take out whatever is in the savings pot. But that withdrawal will be taxed at your marginal tax rate. To withdraw money from your savings pot, you will have to submit a request to your retirement fund administrator. 

The fund administrator then has to get a tax directive from SARS. If you owe SARS any money, that money will be deducted from the withdrawal by SARS. 

The Association for Savings and Investment South Africa (ASISA) explains that as your fund can only seed your savings pot from 1 September 2024, based on the value of your fund as at 31 August 2024, it may take quite a few days for your fund to get the updated value as of that date, and to do the seeding calculation for thousands of members. ASISA says that you will only be able to apply for a withdrawal when your fund tells you that it has seeded your savings pot and is ready to accept your application. 

Neesa Moodley explains that anyone who was 55 years old or older on 1 March 2021, and is a member of a provident fund, would be excluded from the two-pot system. In that case, their retirement savings would be the same as they were a year ago, with no separate savings pot. If they want to be part of the two-pot system and withdraw from the savings pot, they would have to ask their fund administrator how they could be part of it. 

Wishing you the best,
Athalie