There’s a moment in every career when you should stop asking, “How much have I saved for my retirement?” and start asking, “What now?”.

Retirement isn’t the end of your financial journey; it’s the beginning of a new one. And, while most of us spend decades building up our retirement savings, far fewer take the time to understand how to turn our savings into a reliable income, navigate new tax realities, and properly plan our estate.

According to Siphamandla Buthelezi, Head of Platforms at advisory firm NMG Benefits, this is why people approaching retirement need to ask the right questions. “The ideal time to start putting everything in place is five years before you retire. This enables you to make informed decisions, iron out any admin issues, and understand the impact of your choices.”

Here are the most important questions you should ask your financial adviser:

What happens to my savings? Is it better to opt for a living annuity or a life annuity? Should you take a portion as a lump sum? Each comes with different income options, tax implications, and risks. If you choose a living annuity, you’ll need to decide on a realistic monthly drawdown rate and ensure your investments can keep up with inflation. A life annuity, on the other hand, offers guaranteed income for the rest of your life but comes at the cost of flexibility.

How will fees affect my income? Platform administration, investment management, and advice fees can significantly reduce your net income over time. Every rand spent on fees is a rand that doesn’t support your lifestyle, so you should understand what you’re paying – and whether it’s reasonable.

Are there tax implications? If you’re behind on your taxes, SARS will deduct the outstanding amount from your savings before you receive a cent. In addition, any lump sum you may take is taxed according to a sliding scale, although the first R550,000 is tax-free. Monthly drawdowns from living or life annuities are taxed just like any other income.

What about medical aid? Unless your employer offers post-retirement medical benefits, your membership ends when your job does. Even if you’re allowed to stay on your company’s scheme, the portion that your employer may have been paying will likely fall away, leaving you to foot the full premium just as your healthcare needs start to increase. Apart from the monthly premium, you also need to plan for gap cover and chronic condition benefits,.

Does my will reflect my wishes? You need to ensure your will is up to date and your beneficiary nominations align with your intentions. If you’re concerned about your future decision-making capacity, you should consider giving someone power of attorney, so they can make financial and healthcare decisions on your behalf. This shouldn’t be given lightly; you need to fully trust the person, and understand what you’re authorising.

Will my lifestyle be sustainable? A good rule of thumb is that your retirement income should equal 75% of your final salary, assuming that major expenses, like bond and car payments, have been settled. This is where a detailed financial and lifestyle audit comes in. You need to map out exactly what your income will be, what your expenses will look like, and whether there are any shortfalls.

Buthelezi notes that retirement isn’t just about stopping work. “It’s about stepping into a new chapter with the confidence that your financial foundation is solid. And this process doesn’t begin the day you stop working. It begins today – with asking the right questions.”

Retrenchment is more than just losing your job. It can be a deeply destabilising experience that affects your income and savings for years to come. For many South Africans, the biggest question is: What happens to my pension fund if I’m retrenched? And just as important: What are my rights in the retrenchment process itself?

Natasha Huggett-Henchie, Consulting Actuary at financial advisory firm NMG Benefits says that all employees have rights and options when it comes to retirement savings after retrenchment – but the decisions you make can have far-reaching consequences. “The wrong move could mean working years longer to retire or retiring with far less than you’d planned.”

Huggett-Henchie breaks down how to protect your financial future in the event of a retrenchment:

Your pension savings

If you’ve been contributing to a retirement fund through your employer, that money remains yours. But whether you walk away with your full financial potential or take a long-term knock depends on what you choose to do next. 

Under the two-pot retirement system, your savings are split into two components: a retirement pot (which you can only access when you retire), and a savings pot (which you can withdraw from once per tax year, even while employed). If you joined your fund before 31 August 2024, you will also have a vested pot. If you’re retrenched, you can access your savings pot and your vested pot. While it may be tempting to cash in, your withdrawal will be taxed. If you resign, the first R25,000 on your vested pot may be tax-free but after that, the more you take out, the higher the percentage of tax that will be levied. Your savings pot is fully taxed at marginal rates without any tax break, irrespective of whether you resign or are retrenched.

Fortunately, however, if you are retrenched you could qualify for your vested benefit to be taxed as a retirement, which is far more favourable than a withdrawal, with up to R550,000 tax free. The downside is that this is a “once in a lifetime” opportunity, so if you use up your “retirement tax allowance” if you are retrenched at age 40, it means you will have no tax-free benefit at age 65 should your eventually retire.

So, is it a good idea to withdraw, with or without using the beneficial tax? “Only if you urgently need the funds and have no other safety net. Ideally, you should preserve your pension savings by transferring them to another retirement savings vehicle, or to your new employer’s fund if you’re starting a new job.”

Your retrenchment benefit

If you belong to a group scheme through your employer, you may have a retrenchment benefit. This is usually a lump sum or short-term income that kicks in if you’re formally retrenched. You can also claim a retrenchment benefit through the Unemployment Insurance Fund (UIF). Your HR team, or a financial adviser, can give you more details.

Your life and disability cover

Another area people often overlook is the insurance cover they have through their group scheme. This may include things like life insurance, disability protection, or funeral cover. These benefits typically end when your employment ends but some insurers offer a conversion option that enables you to take over the policy in your personal capacity. But, the window to act is often just 30 days from date of exit. Even if this cover isn’t convertible, it’s worth speaking to a financial adviser to explore how to replace it privately, especially if you have financial dependants.

Your rights during retrenchment

Retrenchment is governed by the Labour Relations Act, which means you have the right to be consulted before any decision is made. It also requires employers to follow a fair process.

Your employer must give you formal notice of potential retrenchment and invite you (and your union or representative, if applicable) to consult on why retrenchments are happening, who’s being considered, and whether there are alternatives. You have the right to ask questions and explore alternatives.

If you’re retrenched, you’re legally entitled to:

• One week’s severance pay for each year of service.
• Compensation for unused leave days.
• The notice period agreed to in your employment contract.

If your employer hasn’t followed the correct process, you have the right to refer the case to the CCMA.

The financial consequences of a retrenchment can last for decades, so it’s important to walk away with what’s yours. “The decisions you make about your pension savings and other benefits will shape your financial journey going forward. Get professional support from a qualified financial adviser, like those at NMG Benefits, and protect the future you’ve worked so hard to build,” says Huggett-Henchie.

When a loved one passes away, finances are the last thing families should have to worry about. Yet, time and again, grief is compounded by confusion and conflict over pension fund payouts. The truth is, ensuring what happens to your pension fund after you die isn’t as simple as naming a beneficiary or drafting a will. Legislation, cultural nuances, and the issue of ‘dependency’ all play a role in who ultimately receives what.

The type of pension or group life fund you belong to — whether approved or unapproved — directly affects how your death benefits are distributed. In the case of unapproved pension or group life funds, these are not governed by Section 37C of the Pension Funds Act, meaning the employer or the terms of the policy determine who receives the benefit.

To ensure fairness, employers typically follow the most recent beneficiary nomination form completed by the member. However, Siphamandla Buthelezi, Head of Platforms at advisory firm NMG Benefits explains, "If the member hasn't updated their beneficiary nominations, there's a risk that the benefit may go to individuals the member no longer intended to support after their death."

For this reason, it is especially important with unapproved funds to regularly update your beneficiary nominations to ensure your wishes are accurately reflected and honoured.

Buthelezi, says that in the case of approved pension funds, the rules are different. Death benefits are distributed in accordance with Section 37C of the Pension Funds Act. This means the fund's trustees are legally obligated to investigate and identify the deceased member’s dependants and/or nominated beneficiaries, and then allocate the benefit based on financial dependency and other relevant legal considerations. The final decision rests with the trustees, not necessarily with the nominations made by the member.

In these cases, Trustees of the funds are legally obliged to prioritise financial dependents over nominated beneficiaries. When a member of the approved pension fund passes away, the Trusteed of their pension fund begins an investigation into who financially depended on the deceased, and to what extent. These investigations often include a deep dive into the deceased’s financial records, looking for recurring payments such as rent, school fees, or allowances.”

This means that even if you have named beneficiaries in your pension fund policy, they may receive nothing if they were not financially dependent on you. Conversely, someone you never intended to benefit – like a former partner or someone you are having an affair with – could end up receiving a significant portion of your pension savings.

“It’s a hard truth,” says Buthelezi, “but financially dependency trumps relationship in the eyes of Section 37C of the Pension Funds Act.”

Financial dependency extends to children born out of wedlock or any other individuals that can prove financial dependency on the deceased. In some instances, a wife may even find herself financially responsible for children she never knew existed, especially if she and her husband were married in community of property, and he supported these children during his lifetime.

Having a will is important, but it will not override Section 37C pension fund rules. Your Will governs your estate, meaning your assets, investments, and personal belongings, but pension funds do not consult your Will after you have passed away.

The takeaway? “Update your beneficiary nominations regularly, and talk to your family about your relationships and commitments. We see all too often how spouses only find out how their partners lived, and who they supported, after the partner has passed. But, by then, it’s too late to influence their decisions or safeguard your financial wellbeing”, says Buthelezi.

A divorce doesn’t just end a marriage. It can also have long-term financial consequences, particularly on your pension and provident fund. Many people are unaware that their retirement savings can be split in a divorce, and many spouses do not realise they have a right to claim a portion. Conversely, some believe they are entitled to a payout when they are not.

When a couple divorces, the spouse who is not a member of the pension fund (the non-member spouse) can potentially claim a share of the member spouse’s pension. Such payouts are made easier by the ‘clean-break principle’, which allows for an immediate payout to the non-member once the divorce is final.

“The clean-break principle has made payouts more accessible for non-member spouses,” says Siphamandla Buthelezi, Head of Platforms at advisory firm NMG Benefits. “They do not need to wait until the member retires, resigns, or dies before they can access their share. This principle was introduced into South African law to provide fairness and financial independence to spouses’ post-divorce. They can be paid as soon as the divorce is granted, and the fund processes the claim.”

Dividing Pensions in Divorce: What the Law Says

How a pension fund is divided depends on the presiding judge or magistrate’s ruling, and the marriage contract in place:

• In community of property: All assets, including pensions, may be shared upon divorce.
• Out of community with accrual: The growth in pension savings during the marriage may be split, but the pre-marriage amount is protected.
• Out of community without accrual: The pension remains with the member, unless otherwise agreed in the divorce settlement.

A fund will only recognise a claim if there is a decree of divorce stamped by the official court, which implies that the marriage was legally valid, whether this is via civil, religious, or customary processes.

A customary marriage is legally valid in South Africa if both parties are over the age of 18 and have consented to the marriage in accordance with customary law. There must be evidence that the marriage was negotiated, entered into, or celebrated in accordance with customary traditions -  including lobola negotiations and the formal handing over of the bride. While customary marriages should be registered with the Department of Home Affairs, failure to register does not invalidate the marriage. Polygamous marriages are recognised, provided they comply with applicable customary practices and legal procedures, including applying to the court for approval of a written contract regulating the future matrimonial property system.

It is possible for people to be legally married under customary law without being fully aware, particularly when cultural practices such as lobola or traditional ceremonies have taken place, which may meet the legal requirements for a valid customary marriage even without formal registration or a written agreement. In some cases, individuals may not realise they are legally married under customary law. However, as Buthelezi explains, "Any future marriage is invalid without a legal divorce having occurred first." Furthermore, there have been instances where individuals believed they were legally married, only to discover that their partner was already married. Regardless of whether the partner was aware of their marital status, this invalidates the second marriage, and the ‘second spouse’ loses their rights, including the right to claim pension benefits.

If a member can prove that a marriage is not legally valid and there is no decree of divorce, the pension fund is not obligated to pay the non-member. For example, if a couple believed they were married under customary law but the court agrees that not all necessary traditional steps were completed, there will be no claim against the member spouse’s pension fund.

Tax Implications

It is also important to understand the tax implications. If the member spouse takes their portion as a cash payout, it will be subject to tax at the applicable withdrawal tax rates, which may vary depending on the amount. However, if the payout is transferred directly into another retirement savings fund, such as a retirement annuity or pension fund, the transfer will not be taxed at the time, as long as it complies with the relevant regulations

“Divorce is hard enough emotionally, therefore understanding the financial and legal implications, especially around pension and provident funds, can save both parties from the added financial stress and loss later on” concludes Buthelezi.

This article was originally published by News24 on 2 May 2025.

The introduction of the Two-Pot System marked a significant shift for fund administrators, requiring them to engage directly with fund members rather than solely with employer groups. In our case, this meant transitioning from managing interactions with 1,500 employer groups to handling inquiries and claims from up to 160,000 individual pension fund members.

Siphamandla Buthelezi, Head of Platforms at advisory firm, NMG Benefits, says that this shift necessitated innovation – at scale, and at pace. “Traditionally, pension fund administrators communicated with employers, who then relayed information to their employees. This is still the case for some of employee benefits, but when it comes to retirement funds the Two-Pot System means that, for the first time, fund members are talking to their fund administrators directly, and this brought about an urgent need for digital transformation.”

Streamlining Fund Access Through Smart Innovation

User-friendly digital platforms, including AI-powered mobile apps, online portals, and automated emails and SMS’s, are the first solutions that spring to mind when a provider wants to facilitate seamless interactions. But, given the very specific and heavily regulated conditions of the Two-Pot System, very little existed in this arena when fund members were first allowed to claim in the 2024-25 tax year.

Buthelezi says that developing these tools not only provided 24/7 convenience for their fund members, but it also empowered them to withdraw funds easily and quickly. “Our purpose-driven tech innovations allow our members to access and update their information, check their fund balances, and initiate transactions independently thus ensuring faster processing. Innovation enables us to handle routine queries, provide instant responses to common questions, and guide our members through the claims processes.”

With the surge in direct interactions, many administrators initially struggled to manage member queries effectively, and this led to NMG prioritising the development and implementation of advanced query management (ticketing) systems to categorise and track inquiries, identify cases where members had made multiple enquiries, and ensure meaningful and timely responses. The value of multi-channel communication strategies that incorporate email, WhatsApp, SMS, and in-app messaging very quickly came to the fore – especially given the challenges of communicating with members who work in mines, often do not have smart phones, and are underground for days at a time, as an example.

Buthelezi explains that another major challenge lies in the need to facilitate fund withdrawals despite data inconsistencies and inaccuracies, saying that where incorrect tax and contact phone numbers, and other details provided by employers delayed payments, therefore that impacted the claims process. By leveraging data validation tools and integrating with national databases like those at SARS and also allowing members to update their own data via the app, NMG Benefits was able to bridge this gap.

“The introduction of the Two-Pot System presented a transformative moment for pension fund administrators. Our innovations not only addressed immediate challenges but also set a new standard for efficiency and accessibility. More education is still needed around the Two-Pot System in terms of how it works. Language barriers and access to information are some of the key issues that still need to be addressed”, says Buthelezi.

As life expectancy rises and the quality of life improves, South Africans face the pressing need to ensure financial security post-retirement. The Two-Pot System is designed to improve retirement outcomes by ensuring long-term savings are preserved while providing access to funds for short-term needs.

The Reality of Retirement Readiness
As we now live longer, it’s essential for employees to plan as if they’re going to live to 100. Insights gathered from our extensive experience in the industry indicate that maintaining your lifestyle after retirement requires significant financial preparation. Experts suggest having at least 15 times your annual salary as a safe cushion to ensure a comfortable retirement. Even among those who have formally planned for retirement, there is a prevailing lack of confidence in their ability to support themselves long-term, particularly in light of inflationary pressures and the current economic climate.

Overcoming the Temptation to Withdraw
As part of the Two-Pot System, members will be able to withdraw cash from their savings pot once every tax year (called a Savings Withdrawal Benefit). And while having access to a portion of retirement savings is helpful in emergencies, it’s important that employees aren’t tempted to treat their retirement funds as a transactional account. But even if they do, NMG Benefits believes the new system could still benefit members in the long run as it will prevent them from having to take out expensive short-term loans. And, at the same time, being forced to preserve two-thirds of their funds over the long-term (and not cashing in when they change employers) will improve retirement outcomes. This approach encourages better financial planning and promotes long-term financial stability.

Empowering Members with Knowledge
This is the biggest change that the industry has seen in decades, so NMG Benefits believes that the Two-Pot System requires proactive member education and personalised guidance. Especially because fund members will be in the driving seat for all Savings Withdrawal Benefit decisions, as well as the movement of funds between pots. Therefore, members need to understand the core changes to the system, a simple way to interact with their pots to see how much money is in there, and the ability to make an informed decision about what to do with it. They also need to be guided through the withdrawal process so they know whether they qualify for the withdrawal and what to expect next.

Before making the decision to withdraw, it's crucial for members to be well-informed or consult with an expert who specialises in retirement planning. This ensures that they will have the correct amount of money saved when they retire and that their resources will be handled in a safe and predictable way.

Innovating Financial Education with SmartAlec
NMG Benefits has been using WhatsApp to educate members about financial literacy for the last 3 years. Our financial education chatbot, called NMG SmartAlec, helps members understand over 100 important financial concepts that are needed to make informed financial decisions. It is available in 4 South African languages, and uses a wide range of local stories and gamification techniques to drive engagement and progress through the content. Our clients appreciate the measurability of impact, and the ability to empower staff working in remote locations as the digital learning experience only requires a small amount of data and a WhatsApp application.

Our Two-Pot Innovations Put Members in the Driver Seat
Using our experience with SmartAlec over the past 3 years, we have built a personalised, guided experience over WhatsApp to support members with their Savings Withdrawal Benefit decision and enable them to initiate the transaction digitally and in real-time.

It includes multi-factor ID verification, structured education using bite-size explanations and examples, the ability to see their pot balances, an opportunity to check whether they would qualify for the withdrawal given all the rules and deductions, as well as a guided withdrawal experience where their expectations are managed regarding timelines, fees, taxes, and long-term implications.

Better Outcomes for All
Our goal is to empower members and increase their satisfaction while relieving the burden on HR personnel and administrators who will be managing an influx of queries, confusion, concerns, and complaints. By providing a streamlined and user-friendly channel, HR and administrators can focus on more strategic tasks, knowing that members have the tools and knowledge they need to make informed decisions about their retirement savings.

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T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968

As life expectancy rises and quality of life improves, South Africans are facing the pressing need to ensure financial security post-retirement. Insights gathered from our extensive experience in the industry indicate that maintaining your lifestyle after retirement requires significant financial preparation. Experts suggest having at least 15 times your annual salary as a safe cushion to ensure a comfortable retirement.

However, our observations show that the majority of South Africans have not formally planned for retirement. Even among those who have, there is a prevailing lack of confidence in their ability to support themselves long-term, particularly in light of inflationary pressures and the current economic climate.

Janice Masencamp, Head of Retirement Fund Consulting at NMG Benefits, says that while there’s no mandatory retirement age in South Africa, retirement age is often written into employment contracts, and employees need permission from their employers to keep working beyond that age to be able to sustain their lives and those of their dependents.

“By working for only four extra years, post-retirement income can increase by about 10%. By working for an additional 10 years, this income can almost double,” says Masencamp.

Studies suggest people who work longer retain higher levels of energy and mental awareness and retain a continued sense of purpose and belonging. However, for most ‘unretirees’, the biggest advantage of staying in the workforce is the ability to generate additional income and having more years to save towards retirement.

Now, that we live for longer, we’re getting to a point where we should start planning as if we’re going to live to 100. This will impact the way we do financial planning. And those who don’t have enough retirement savings will keep working until they’re no longer able to,” says Masencamp. South Africans need to start actively planning for retirement as early as possible. This includes speaking to a financial planner, to help navigate the numerous options for investing your retirement income based on your personal needs, especially with the implementation of the two-pot system. “A planner will help you understand your various options and alternatives when it comes to deciding to withdraw or not, and what the ramifications of those decisions will be.”

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T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968

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T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968

It’s likely that you have heard of the two-pot system that will be changing the way retirement funds work. If you are a member of a pension or provident fund, a retirement annuity fund or have money in a preservation fund, the new rules will apply to you. It’s a good idea to take note of the changes, as they are significantly different from the current regime!

Why are these changes happening?

The aim with the new system is to give South Africans more control over their savings in times of financial hardship, while still allowing your money to be preserved for your retirement.

What are these two pots?

Any new retirement contributions made after 1 September 2024 will be allocated into two pots – one for “savings” and one for “retirement”.

One third of your contributions will be allocated to the savings pot and you’ll be able to access this money in an emergency. Until now, you haven’t been able to take any money from your pension or provident fund while you are working for your current employer or from your RA before age 55.

The remaining two-thirds of your contribution will be allocated to the retirement pot must be used to buy a pension when you retire.

What happens on 1 September 2024?

There will be a once-off transfer of 10% of your existing retirement savings in a pension, provident, RA or preservation fund to your savings pot as a starting value. This is capped at R30 000. After 1 September 2024, new contributions are split 1/3 and 2/3 into the savings and retirement pots.

How do you access the savings pot?

You can withdraw from your savings pot once per tax year. The tax year runs from 1 March to 28 February each year. You must withdraw a minimum of R2 000. The maximum amount you can withdraw will be the balance available in the pot.

Amounts that you withdraw are taxed at your marginal income tax rate. Its likely that the fund administrator will deduct a fee for the withdrawal.

‍It’s recommended that you only use the money in your savings pot when there is an emergency.

What happens if you leave your employer?

Obtaining a cash benefit from your retirement fund is no longer linked to leaving your employer. After 1 September 2024, if you leave your employer because you resigned, are retrenched, or dismissed, you will only be able to take a cash benefit if there is a benefit in your savings pot. If you have already been paid that benefit, the benefit in your retirement pot will not be paid to you. The new system helps you preserve 2/3’s of your retirement money until you retire.

What happens to your savings pot when you retire?

When you retire, the benefit in your retirement pot must be used to buy a pension that will provide you with a monthly income. If you have a benefit in your savings pot, you can either take this in cash or use it to buy a pension.

The new system balances the need for accessing cash when there is a need while encouraging us to have savings available when we reach retirement age.

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T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968