The vested component is the member's benefit as at 31 August 2024, plus growth thereon. It includes vested and non-vested benefits up to 31 August 2024 and contributions payable up to that date, even if not yet received. No new contributions may be paid into the vested component after 1 September 2024 — except for over 55-provident fund members, to whom the two-pot system does not apply unless they opt in. The seeding amount for the savings component is deducted from the vested component; it comes exclusively from the member's benefit as at 31 August 2024 and does not include contributions received late after that date.
The rules that currently apply to a member's benefit continue to apply to their vested component:
Section 37D deductions (housing loans, divorce orders, maintenance orders, employer damages claims) must be made proportionately from all three components. On retirement, the member may take their total vested benefit plus one-third of their non-vested benefit in the vested component as a lump sum, taxed on the retirement lump sum benefit tax table. At least two-thirds of the non-vested benefit must be used to purchase an annuity, subject to the de minimis rule.
Effective: 1 September 2024From 1 September 2024, one-third of a member's contributions is allocated to the savings component. Over 55-provident fund members are excluded unless they opt in. The savings component has an opening seeding amount equal to 10% of the member's vested component as at 31 August 2024, limited to R30,000 — done once only. A member joining a retirement fund for the first time after 1 September 2024 has no seeding amount.
A member may make one savings withdrawal benefit per contract per tax year (1 March to end of February), provided at least R2,000 remains in the savings component. The minimum amount of each savings withdrawal benefit is R2,000 before costs and tax; there is no maximum. The benefit is taxed at the member's marginal tax rate. The fund administrator must apply for a tax directive, which requires the member's tax number. Once SARS issues a directive, it is final and cannot be cancelled.
The concept of separate contracts applies primarily in retail funds (different policies within the same preservation or retirement annuity fund) but also in occupational funds where a member holds both an active record and a paid-up record from a prior resignation. Seeding and the annual savings withdrawal entitlement apply per contract.
On retirement, the member may take their total savings component as a lump sum, taxed on the retirement lump sum benefit tax table (first R550,000 in aggregate at 0%). In a defined benefit fund, the savings component equals one-third of the member's pensionable service after 1 September 2024.
Effective: 1 September 2024From 1 September 2024, two-thirds of a member's contributions is allocated to the retirement component. No pre-retirement withdrawals are permitted from the retirement component, except on cessation of South African tax residency or expiry of a visa. On retirement, the member must use the full retirement component to purchase an annuity, subject to the de minimis rule. In a defined benefit fund, the retirement component equals two-thirds of the member's pensionable service from 1 September 2024.
Section 37D deductions must be made proportionately from all three components.
Effective: 1 September 2024Within the same fund, a member may allocate amounts from the vested component to the retirement component, and from the savings component to the retirement component. On transfer to another fund, amounts from the vested component may be allocated to the vested or retirement component of the receiving fund; amounts from the savings component may be allocated to the savings or retirement component of the receiving fund.
A member's decision to allocate an amount to their retirement component is irrevocable. All implications must be considered before making such an allocation, as it cannot be reversed.
When a non-member spouse transfers their portion of a divorce order allocation to another fund, the same component-matching applies: the portion originating from the member's vested component goes to the non-member spouse's vested component, and so on.
"Retirement date" means the date on which the member elects to retire, not the date they first reach normal retirement age. A member who has reached normal retirement age but has not yet elected to retire may still access benefits as set out below. Once a member has elected to retire, they must take a retirement benefit; pre-retirement access is no longer available.
A member of a pension, provident, preservation or retirement annuity fund (excluding over 55-provident fund members and members in legacy RA policies) may make one savings withdrawal per contract per tax year, provided at least R2,000 remains in their savings component. The benefit is taxed at the member's marginal tax rate.
A member of a pension or provident fund may take their total vested component as a lump sum on resignation, taxed on the withdrawal lump sum benefit tax table (first R27,500 in aggregate at 0%). The retirement component is not accessible on resignation. If the member has not yet taken a savings withdrawal in that tax year and has at least R2,000 in their savings component, they may also take a savings withdrawal benefit on resignation.
A member of a preservation fund may make one pre-retirement withdrawal from their vested component (up to the full amount), taxed on the withdrawal lump sum benefit tax table. The right applies across preservation funds: once exercised from one fund and the balance transferred to another, no further pre-retirement withdrawal is available from the second fund. The retirement component is not accessible. A savings withdrawal benefit may also be taken if at least R2,000 remains in the savings component and no savings withdrawal has yet been made that tax year.
If the total benefit in a member's retirement annuity fund is below the prescribed de minimis amount (currently R15,000), the member may take the total fund benefit as a lump sum before retirement, taxed on the withdrawal lump sum tax table. This applies at fund level across all policies.
A pension or provident fund member who emigrates and terminates employment may take their vested component as a resignation benefit and their savings component as a savings withdrawal benefit. If they cease to be a South African tax resident, they may take their retirement component as a lump sum after cessation of tax residency for three consecutive years, taxed on the withdrawal lump sum tax table. A retirement annuity fund member (and a preservation fund member who has already exercised their pre-retirement withdrawal) may take their total benefit after tax residency has ceased for three uninterrupted years. SARB-recognised emigration before 28 February 2021 (approved by 28 February 2022) also entitles an RA member to full pre-retirement access.
When a member's visa or work permit expires, their total benefit may be taken as a lump sum based on the visa expiry, taxed on the withdrawal lump sum tax table. This applies to pension, provident, preservation and retirement annuity fund members.
On the death of a member before retirement, the total benefit becomes payable. Beneficiaries allocated a portion under section 37C of the Pension Funds Act may choose a lump sum, an annuity (including a living annuity), or a combination. Any lump sum is taxed in the hands of the deceased immediately prior to death on the retirement lump sum benefit tax table. Annuity payments are taxed as income in the beneficiary's hands.
Effective: 1 September 2024A member need not take their retirement benefit immediately on reaching normal retirement age (55 in a retail fund; as specified in fund rules in an occupational fund). On retirement, a member must use the following to purchase an annuity:
If the combined value of these two amounts is less than R165,000, the member may take both as a lump sum instead, taxed on the retirement lump sum benefit tax table. Where the member purchases more than one annuity, the amount applied to each must be at least R165,000.
The RLAA excludes over 55-provident fund members from the two-pot system unless they elect to participate. An election to opt in must be made between 1 September 2024 and 31 August 2025; on opting in, the seeding amount is calculated on the last day of the month of the election, capped at R30,000.
Provident fund members qualify if: (a) they were a member of a provident fund on 1 March 2021; (b) were 55 or older on 1 March 2021; and (c) are still a member of that same provident fund on 1 September 2024. If such a member transfers to another fund between 1 September 2024 and 31 August 2025, they become subject to the two-pot system from the date of first contribution to the new fund, with seeding calculated on that day. Transfer after 31 August 2025 triggers two-pot participation from date of first contribution but without seeding.
Provident preservation fund members qualify if: (a) they were a member of a provident fund before 1 March 2021; (b) transferred that benefit to a provident preservation fund before 1 March 2021; (c) were a member of a provident preservation fund on 1 March 2021; (d) were 55 or older on 1 March 2021; and (e) are still a member of that provident preservation fund on 1 September 2024.
Where these criteria are met, the fund administrator need not create a savings component or allocate a seeding amount. The member has no access to a savings withdrawal benefit unless they opt in.
Legacy retirement annuity (RA) policies are excluded from the two-pot system. The RLAA defines a legacy RA policy as any policy held by a retirement annuity fund entered into before 1 September 2024 with a pre-universal life or universal life construct, subject to conditions the FSCA may determine.
A universal life construct policy has both a savings and a risk cover component (disability and death benefits adjustable at any time). Because risk benefit premiums are determined monthly or annually based on a flexible structure, it is impossible to split contributions between risk cover and retirement provision — making division into three two-pot components impractical. Pre-universal life policies carry reversionary bonuses, permit no withdrawals and are structured around reserves and surrender values rather than member accounts.
Members in legacy RA policies who transfer to a non-legacy policy after 1 September 2024 are not entitled to seeding on transfer. Unless they moved to a non-legacy policy before 1 September 2024, they will not be subject to the two-pot system and will not be entitled to a savings withdrawal benefit. Members must weigh what ancillary benefits they would surrender before switching.
For many members, pre-retirement access to their retirement benefit may appear to offer an immediate solution to financial difficulties. Before accessing money intended to provide post-retirement income, members should consider the long-term impact of such withdrawals on their future financial security. Any financial decision with potentially significant long-term consequences should be taken with the assistance of a qualified financial adviser.