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HOT TOPIC | Two-Pot System

With the introduction of the Two Pot System by the Government, it provides for compulsory preservation of the two thirds of a member’s retirement funds while allowing him/her to access up to one third in cash each year before retirement without having to resign. The whole idea behind the Two Pot System is to assist people to help cope with financial challenges but simultaneously keep a portion for retirement.

Introduction to the Two Pot System: The Two Pot System is a novel approach to managing retirement contributions. Under this system, your contributions are divided into two distinct pots or accounts:

  1. Savings Pot (One Third): This pot captures one third of your total contributions.

  2. Retirement Pot (Two Thirds): Two thirds of your contributions will be directed here.

Applicability: This division applies to all retirement funding mechanisms, which includes, but is not limited to, Retirement Annuities, Preservation Funds, and Employee benefits.

Key Features of the Savings Pot:

  • From this pot, you can access funds before reaching retirement age. Starting from the projected date of 1 March 2024, one can access up to one third of the net contributions made in the future.

  • There is a minimum withdrawal limit set at R 2,000. This withdrawal is subject to prevailing marginal tax rates and can be executed once per annum.

  • For any funds that are in the savings pot prior to 29 February 2024, a withdrawal of 10% of the vested component is permissible. However, this is capped at R 25,000, or the 10% value, whichever is lesser. This withdrawal too is subject to marginal tax rates.

Features of the Retirement Pot:

  • The Retirement Pot is designed to be more restrictive to ensure future financial stability. Funds from this pot are only accessible upon reaching the age of 55.

Reasons for the Introduction of the Two Pot System: The government has initiated this Two Pot system primarily for two reasons:

  1. Enhanced Retirement Comfort: It aims to offer a more structured approach to ensure that South Africans have sufficient funds upon retirement, promoting a more comfortable post-retirement phase.

  2. Emergency Fund Accessibility: Recognizing that emergencies can arise before retirement, this system allows individuals to tap into a portion of their savings without compromising their core retirement fund. This means, while you are still gainfully employed, you have the liberty to access a part of your retirement savings for unforeseen exigencies.

In conclusion, this will open opportunities to financial advisors to engage more with their clients, more advice and guidance will be needed by the client in order to make informed decisions.


  • National Treasury Media Statement, 9 June 2023

  • Momentum Corporate

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