The two-pot retirement system explained
Since September 2024 your retirement contributions go into two pots: one you can dip into once a year, one locked until retirement. How it works and the costs.
South Africa's two-pot retirement system changed how retirement savings work from 1 September 2024. It applies to pension funds, provident funds, preservation funds and retirement annuities. The idea is simple: give members limited access to some of their savings in an emergency, while protecting most of the money for retirement. This guide explains how the two-pot system works, how savings pot withdrawals are taxed, and when using your savings pot makes sense.
Why the two-pot system was introduced
Under the old rules, many people cashed in their entire retirement savings when they changed jobs, leaving them with little or nothing at retirement. Others in financial distress resigned just to get access to their money. The two-pot system tackles both problems: it allows a small, controlled withdrawal while employed, and it locks away the larger share of new savings until retirement.
The pots explained
Contributions made since September 2024 are split. About one-third goes into a savings pot, which you can access before retirement, and two-thirds goes into a retirement pot, which stays locked until you retire, even if you resign or change jobs. At retirement, the retirement pot must be used to buy an income, such as an annuity.
Money you saved before September 2024 sits in a third part, the vested component, which follows the old rules. When the system started, up to 10% of that vested money, capped at R30,000, was moved into each member's savings pot as "seed capital", so people had something to draw on from day one.
Taking money out of the savings pot
You can make one withdrawal per tax year from your savings pot, of at least R2,000. The withdrawal is added to your taxable income for that year and taxed at your marginal rate, the same rate as your top slice of salary, rather than at the lower rates that apply to lump sums at retirement. Funds may also charge an administration fee, and SARS may first deduct any tax you owe.
That tax matters. If you are in the 31% bracket, a R10,000 withdrawal could cost about R3,100 in tax, leaving roughly R6,900, and that money will no longer grow for your retirement. You can check your marginal rate with our South Africa tax calculator and our guide to the 2026/27 tax tables.
The real cost of a withdrawal
The tax is only part of the cost. Money left in a retirement fund keeps growing for decades. R10,000 left invested for 25 years at a 7% real return would grow to more than R54,000 in today's money. Taking it out early means giving up that growth, not just the R10,000 itself.
When using your savings pot makes sense
The savings pot is best treated as a last-resort emergency fund: for a medical crisis, or to avoid expensive debt such as a payday loan. Using it for everyday spending or holidays defeats its purpose, because each withdrawal permanently reduces your retirement savings and the decades of growth they would have earned.
A better plan is to build a separate emergency fund in a savings account or tax-free savings account, and leave your retirement pots to grow. Members who leave their savings pot untouched will simply have it added to their retirement benefits when they retire.
Boosting your retirement savings
If you can, consider adding to your retirement savings through a retirement annuity, which also reduces your income tax within the limits; see our guide to retirement annuities and tax. Check your fund statement each year to see how much is in each pot.
Frequently asked questions
How often can I withdraw from my savings pot?
Once per tax year, with a minimum of R2,000.
How are savings pot withdrawals taxed?
They are added to your taxable income and taxed at your marginal rate.
Can I access my retirement pot if I resign?
No. The retirement pot stays locked until retirement.
Sources
This article is general information, not financial advice.