The two-pot retirement system explained
On 1 September 2024, South Africa changed how retirement funds work. The two-pot retirement system splits your future contributions into two parts: one you can reach in an emergency before retirement, and one that stays locked away for it.
It solves a long-standing problem, people cashing out their entire retirement savings when they change jobs, while still leaving a controlled valve for genuine emergencies. It applies to pension funds, provident funds, preservation funds, and retirement annuities.
Three pots, not two
Despite the name, there are three components. The two new ones are the savings and retirement pots. The third, the vested pot, is everything you had saved before the rules changed.
| Pot | What goes in | Can you access it before retirement? |
|---|---|---|
| Savings pot | One-third of contributions made from 1 Sept 2024 | Yes: one withdrawal per tax year (minimum R2,000), taxed at your marginal rate |
| Retirement pot | Two-thirds of contributions made from 1 Sept 2024 | No: preserved until retirement, then used to provide an income |
| Vested pot | Everything you saved before 1 Sept 2024 | Keeps the old rules that applied to it |
Seed capital: the savings pot's starting balance
So the savings pot wasn't empty on day one, a once-off seed amount was moved into it: 10% of your vested pot value on 31 August 2024, capped at R30,000. That seed is what many people withdrew in the first months of the system. After that, the savings pot only grows from your future one-third contributions.
Accessing the savings pot
You can make one withdrawal per tax year from the savings pot, with a minimum of R2,000. It's convenient, but it isn't free money.
- The amount is added to your taxable income and taxed at your marginal rate, so a withdrawal can push part of your income into a higher bracket.
- Money taken out now stops compounding for decades. The real cost is the growth you give up, on top of the tax.
- Any amounts you owe SARS can be deducted from the payout.
The savings pot works best as a genuine emergency buffer, well clear of your day-to-day spending.
What happens at retirement
At retirement, the retirement pot must be used to provide an income (typically by buying an annuity), rather than taken as cash. That's the preservation the system is built to enforce. The savings pot can be taken as a cash lump sum (taxed under the retirement lump-sum tables) or added to your income. The vested pot continues to follow the rules that applied to it before the change.
Why it exists
Before September 2024, a member who resigned could often withdraw their entire fund in cash, and many did, arriving at retirement with little left. The two-pot system keeps two-thirds of new contributions preserved however often you change jobs, while the one-third savings pot gives you a limited, taxed release valve for emergencies. It's a deliberate trade-off between access and preservation.
A note for older provident-fund members
Members of provident funds who were 55 or older on 1 March 2021 and stayed in the same fund could opt out of the two-pot system and keep their contributions under the old rules. If that's you, check with your fund which rules you're on.
Related guides
- TFSA vs retirement annuity: how retirement annuities, now under two-pot, compare with tax-free savings.
- 2026/2027 SARS tax brackets: the marginal rates a savings-pot withdrawal is taxed at.