LABOUR BRIEF: Two-Pot Retirement System

What is the Two-Pot System of Retirement?

The Two-Pot System of Retirement is a significant reform that took effect on September 1, 2024, designed to offer greater flexibility and financial security for retirement fund members in South Africa. Under this new system, retirement fund members will have the ability to make partial withdrawals from their retirement savings before reaching retirement age, while preserving a portion that can only be accessed upon retirement. This dual-structure approach aims to enhance retirement outcomes by ensuring that members retain a secure financial base for their retirement years, even if they need to tap into their savings earlier due to financial distress.

Who is the Two-Pot System Meant For?

The Two-Pot System will be applicable to all retirement funds, encompassing both private and public sector funds. However, it excludes certain categories, including:

  • Old generation or legacy retirement annuity policies.
  • Funds with no active participating members, such as those in liquidation, beneficiary funds, closed funds, or dormant funds.
  • Pensioners and members of provident funds aged 55 years or older as of March 1, 2021, who have not opted into the Two-Pot System.

This reform is particularly beneficial for individuals who face financial difficulties, as it allows access to a portion of their retirement funds without the need to resign from their employment. The preservation of a portion of the funds for retirement ensures that members still have a financial safety net for their later years, striking a balance between immediate financial needs and long-term retirement planning.