Two-pot retirement system: one-third of contributions accessible before retirement, two-thirds preserved
Since 1 September 2024, contributions to South African retirement funds are split: one-third goes into a savings component that members can draw on once per tax year (at least R2,000, taxed at their marginal rate) without leaving their job, two-thirds into a retirement component preserved until retirement. Savings built up before that date stay in a vested component under the old rules, from which a one-off seed of 10% (at most R30,000) was moved into the savings component. The reform rests on the Revenue Laws Amendment Act 12 of 2024 and the Pension Funds Amendment Act 31 of 2024; SARS reported 2.4 million approved withdrawal tax directives by 31 January 2025.
Key points
Savings withdrawal tax directives approved
2,403,379
1 Sep 2024 to 31 Jan 2025 · Observed
according to SARS (media release of 31 January 2025)[11]
Out of 2,664,279 applications; gross lump sums paid out: R43.42 billion.
- Status: In force since December 19, 2025. In force as amended by Act No. 6 of 2025 (assented to on 19 December 2025, Government Gazette No. 53916 of 24 December 2025), with most changes deemed to apply from 1 September 2024.[14]
At a glance
Reference text
Revenue Laws Amendment Act, 2024 (Act No. 12 of 2024), assented to on 31 May 2024, completed by the Pension Funds Amendment Act, 2024 (Act No. 31 of 2024)[1][2]
No. Act No. 12 of 2024 (Government Gazette No. 50750) · May 31, 2024
Read the text ↗Carried by
- National Treasury[6][7][4]Designed the reform: discussion paper of December 2021, draft legislation and responses to public comments, then implementation guidance in 2024 · 2021-2024 · Initiator
- Financial Sector Conduct Authority (FSCA)[4][5]Approves the amendments to retirement fund rules required before a fund can apply the system · since 2024 · Implementation
- South African Revenue Service (SARS)[11]Issues the tax directive that tells the fund how much tax to withhold on each savings withdrawal · since 2024 · Implementation
Implementation
- National Treasury
- Financial Sector Conduct Authority (FSCA): approval of fund rule amendments
- South African Revenue Service (SARS): tax directives on withdrawals
- Retirement funds and their trustees: rule changes, split of contributions, payment of withdrawals
Stated objective
Main measures
- From 1 September 2024, one-third of total retirement contributions goes into a savings component and two-thirds into a retirement component; in defined-benefit funds the split applies to pensionable service.[1][5]
- Savings accumulated up to 31 August 2024 form a vested component: it receives no new contributions but keeps earning fund returns, and the previous rules, including access on resignation, still apply to it.[5]
- One-off seed capital: 10% of the vested component as at 31 August 2024, limited to R30,000, transferred to the savings component; it is not repeated in later years.[1][5]
- Savings withdrawal benefit: one withdrawal per tax year (per contract when a member has several contracts in the same fund), of at least R2,000 and with no maximum, added to taxable income and taxed at the member’s marginal rate; the fund withholds the tax set by a SARS tax directive and any outstanding debt to SARS.[1][5][11]
- The retirement component cannot be accessed on resignation and must be paid as an annuity at retirement, unless it is worth no more than R165,000 together with two-thirds of the vested component.[1][5]
- Scope: all active members of private and public sector funds; excluded are pensioners, legacy retirement annuity policies exempted by the FSCA, funds without active members, and provident fund members who were 55 or older on 1 March 2021 unless they opt in. Retrenchment cases are left to a later phase of the reform, according to the National Treasury.[5][1]
- The Pension Funds Amendment Act 31 of 2024 extends the system to the funds governed by their own laws (Government Employees Pension Fund, Transnet, Post and Telecommunications) and requires every fund to amend its rules, with FSCA approval, before implementing it.[2][3][4]
In data
Since 1 September 2024, cumulative counts at each SARS release date
| Cumulative to | Applications | Directives approved / issued |
|---|---|---|
| 10 Sep 2024 (Applications from 1 to 10 September 2024; SARS did not publish approvals for this date.) | 159,853 | – |
| 11 Oct 2024 | 1,213,646 | 1,148,729 |
| 18 Nov 2024 (SARS reports directives « issued » for this date.) | 2,153,942 | 1,914,306 |
| 31 Jan 2025 | 2,664,279 | 2,403,379 |
Scale starts at 0 · Gross lump sums reported by SARS: R4.1 billion applied for (10 Sep 2024), R21.4 billion paid out (11 Oct 2024), R35.05 billion for directives issued (18 Nov 2024), R43.42 billion paid out (31 Jan 2025). Declined applications are mostly due to incorrect identity or tax numbers, according to SARS. Tax collected on these withdrawals reached R11.6 billion by end-February 2025, against an initial estimate of R5 billion for 2024/25, according to the National Treasury.
Timeline
- Announced
National Treasury discussion paper proposes a two-pot system[6]
Discussion paper « Encouraging South African households to save more for retirement »[6]
The National Treasury notes that members commonly access their retirement savings when leaving their jobs, and proposes a two-pot design allowing limited pre-retirement withdrawals with a preservation requirement. Public comments were requested by 31 January 2022.
National Treasury and SARS answer public comments on the draft bill[7][1]
Comments came from 84 organisations and 258 individuals. In response, the government considered raising the seed cap from R25,000 to R30,000 (inflation adjustment) and proposed postponing implementation from 1 March 2024 to 1 March 2025; the date finally written into the 2024 acts is 1 September 2024.
Revenue Laws Amendment Act 12 of 2024: tax rules of the savings, retirement and vested components[1]
Assented to on 31 May 2024 and published on 4 June 2024, the act amends the Income Tax Act; its two-pot provisions come into operation on 1 September 2024.
President Ramaphosa signs the Pension Funds Amendment Act 31 of 2024[3][2][4]
The act amends the Pension Funds Act, 1956, the Post and Telecommunications-related Matters Act, 1958, the Transnet Pension Fund Act, 1990 and the Government Employees Pension Law, 1996, so that private and public sector funds can apply the reform. It was brought into operation by a proclamation published in Government Gazette No. 51122 of 26 August 2024.
SARS: 159,853 savings withdrawal tax directive applications in the first ten days[8]
From 1 to 10 September 2024, an average of 17,964 applications a day; gross lump sums applied for totalled R4.1 billion, according to SARS.
SARS: 2.4 million withdrawal tax directives approved, R43.42 billion paid out gross[11]
Out of 2,664,279 applications, 2,403,379 directives were approved. SARS also said it had identified 213,654 taxpayers who had declared incorrect taxable income to obtain a more favourable tax rate.
- In force
Rules corrected by the Revenue Laws Amendment Act 6 of 2025[14]
In force as amended by Act No. 6 of 2025 (assented to on 19 December 2025, Government Gazette No. 53916 of 24 December 2025), with most changes deemed to apply from 1 September 2024.
Revenue Laws Amendment Act 6 of 2025 corrects the two-pot rules[14]
Among other changes: on a member’s death the savings component may be paid to a nominee or dependant; amounts transferred from another fund’s savings or vested component may be allocated to the retirement component; provident fund members aged 55 or over on 1 March 2021 may opt in within 12 months of 1 September 2024. Most changes are deemed to apply from 1 September 2024.
2026 Budget Review: the boost to household consumption from the reform is unwinding[13]
The National Treasury expects household consumption growth to slow from 3.1% in 2025 to 1.8% in 2026, as temporary income boosts from one-off factors such as the two-pot system unwind. It also reports that benefits paid by the Government Employees Pension Fund rose from R142.4 billion to R167.2 billion in 2024/25, mainly due to higher pensionable salaries and the introduction of savings withdrawal benefits.
The debate
Citoyen takes no position: arguments are reported as their authors put them.
According to its supporters
- The National Treasury presents the system as a relief mechanism for people in real crises, who can reach emergency funds without resorting to loan sharks or quitting their jobs, while a larger portion of savings is preserved until retirement.[4]
- In its 2021 paper, the National Treasury argued that members commonly cash in their retirement savings when leaving their jobs, leaving low replacement values at retirement (around 25% to 30% according to a Sanlam survey it cites), and that household savings average just above 2% of GDP.[6]
- Some commentators on the draft bill called for implementation as early as 1 March 2024, as individuals were likely in desperate need of money; the National Treasury, for its part, defended a capped seed, arguing that a higher seed would worsen retirement outcomes.[7]
According to its opponents
- Commentators representing fund members found the seed cap too low and asked for amounts ranging from R50,000 to R500,000, or a third of the vested value without the 10% limit, according to the National Treasury’s response document.[7]
- Other commentators warned of liquidity risks and adverse effects on asset markets from the seed withdrawals and proposed staggering them (for example by birth month), a proposal the government did not accept.[7]
- Some commentators argued that the timetable was not feasible, saying funds needed 12 to 18 months after the law was promulgated to adapt systems, train staff and inform members.[7][3]
Indicators to watch
- Savings withdrawal benefit: tax directive applications, approvals and gross amounts paid · SARSno Citoyen card yet
- Tax collected on savings component withdrawals (R11.6 billion by end-February 2025, against an initial estimate of R5 billion for 2024/25) · National Treasuryno Citoyen card yet
- Household consumption growth · National Treasury / Stats SAno Citoyen card yet
- Real GDP growth · OCDESee the card →
Sources
- [1]Revenue Laws Amendment Act, 2024 (Act No. 12 of 2024), Government Gazette No. 50750, 4 June 2024 (assented to 31 May 2024) –South African Revenue Service (SARS), Primary legislation, Amendment Acts, June 4, 2024
- [2]Pension Funds Amendment Act 31 of 2024 (English / Afrikaans) –South African Government (gov.za), July 23, 2024
- [3]President Ramaphosa signs Pension Funds Amendment Bill into law –The Presidency, Republic of South Africa, July 21, 2024
- [4]Treasury on signing of Pension Funds Amendment Bill into law –National Treasury (via gov.za), July 30, 2024
- [5]Two-pot retirement system: frequently asked questions (updated August 2024) –National Treasury, August 2024
- [6]Encouraging South African households to save more for retirement (two-pot system retirement proposal and auto-enrolment) –National Treasury, December 14, 2021
- [7]Draft response document on the 2023 tax bills (two-pot retirement system: comments and responses) –National Treasury and SARS, October 25, 2023
- [8]Media release: Preliminary amount of R4.1bn applied for in two pot system –South African Revenue Service (SARS), September 11, 2024
- [9]Media release: More than 1 million taxpayers withdraw from their savings pot –South African Revenue Service (SARS), October 11, 2024
- [10]Media release: The latest Two-Pot withdrawals –South African Revenue Service (SARS), November 19, 2024
- [11]More than 2 million taxpayers withdraw from their savings pot –South African Revenue Service (SARS), January 31, 2025
- [12]2025 Budget Review, Chapter 4: Revenue trends and tax proposals (box « Two-pot retirement reform ») –National Treasury, 2025
- [13]2026 Budget Review –National Treasury, February 25, 2026
- [14]Revenue Laws Amendment Act, 2025 (Act No. 6 of 2025), Government Gazette No. 53916, 24 December 2025 (assented to 19 December 2025) –South African Government (gov.za), December 24, 2025