The retirement pot holds your strict retirement savings. From 1 September 2024, two-thirds of your monthly contributions will go into your retirement pot. You will not be able to withdraw any money from this pot until retirement age. When you retire, this money must be used to buy a pension product, it usually cannot be taken as cash.

There will be a once-off transfer of 10% of your existing retirement savings from your vested pot of your pension, provident, retirement annuity or preservation fund into your savings pot. This is so that you have a starting value in your savings pot, otherwise it would start at zero. The amount transferred will be a maximum of R30 000, so on 1 September you will see a balance in your savings pot of anything up to R30 000.

By law, all members of registered retirement funds must participate in the two-pot system, but there are some exceptions. The two-pot system will apply to you unless you are a pensioner, a member of an unclaimed benefit fund, or a member of a beneficiary fund. If you are a member of a provident fund and you were over the age of 55 on 1 March 2021, and you are still a member of the same provident fund, then you have a choice to either opt in to the two-pot system or continue to opt out. 

You should familiarise yourself with the new rules so you know what to expect and update your personal information at your payroll office. Especially your ID number, contact number, email address, tax number, and employee number.

Instead of seeing your fund credit as one amount, you will now see three different values in three different pots (which are also called “components” in the legislation): a vested pot, a savings pot, and a retirement pot.

You can withdraw from your savings pot once every tax year (remember, the tax year runs from 1 March in one year to 28 February the next year). But there are some requirements you need to meet:

• You need a minimum of R2 000 in your savings pot to make a withdrawal, because the lowest value you can withdraw is R2 000. If you do not have R2 000 in your savings pot yet, you will need to wait for your savings pot balance to grow from contributions and investment growth before making a withdrawal
• If you have a housing loan guarantee, a divorce or maintenance order against your benefit in the fund, or if your benefit in the fund is being withheld due to misconduct, then our team of Case Managers will work with you to understand the details of the deduction, after which they will be able to give you a decision whether the withdrawal can proceed or not. This is to make sure the fund can pay any deductions from your total fund credit and then also pay you your withdrawal.

You will need to ask your employer or retirement fund administrator about how to withdraw from your savings pot. If your retirement benefit is administered by NMG Benefits, you will be able to withdraw from your savings pot in a number of ways:

• You can use the NMG Benefits WhatsApp service, where you can see your savings pot balance, check if you qualify for a withdrawal, learn about the two-pot system, and be guided through the withdrawal process step-by-step
• You can use the online Member Portal, where you can see your savings pot balance and initiate a withdrawal directly
• If you don’t have WhatsApp or access to the online Member Portal, you can ask your employer for help to make a withdrawal on the system or using a withdrawal form. But remember the form will take a lot longer to process so it should be a last resort.

You will need to ask your employer or retirement fund administrator about fees. If your retirement benefit is administered by NMG Benefits, you will be charged a fee for the withdrawal. The fee will depend on the value of your withdrawal, calculated as 2.5% of the gross withdrawal value with a minimum of R85 and a maximum of R600. So, if you decide to withdraw R20 000 from your savings pot, you will pay R500 [R20 000 x 2.5% = R500] and if you withdraw R30 000 you will pay R600 [R30 000 x 2.5% = R750 max R600].

If you withdraw from your savings pot before you reach retirement age, you will be taxed at your marginal tax rate which is based on your gross annual income and the income tax table. The administrator will apply for a tax directive from SARS to confirm the tax rate that they will charge on your savings withdrawal benefit.

Bear in mind that it is possible for the value of your withdrawal to move you into a higher tax bracket once it is added to your annual income, so you may need to pay more tax than you think.

If you have any outstanding debt to SARS, the administrator may be instructed by SARS to pay your debt from the savings withdrawal amount first, before any funds are paid to you.

You don’t need to do anything. If you don’t want to withdraw money from your savings pot, you can continue to save towards your retirement and either leave the funds in your savings pot or transfer the funds from your savings pot into your retirement pot at any time.

It is possible to move money from your vested pot into your retirement pot, and from your savings pot into your retirement pot. But it is not possible to move money out of your retirement pot for any reason. You might consider moving money from your savings pot into your retirement pot if you want to remove the temptation to withdraw it, and make sure the money is protected for your retirement.

You will need to ask your employer or retirement fund administrator about how to transfer money between pots. If your retirement benefit is administered by NMG Benefits, you will be able to transfer funds between pots using the same platforms as you do for withdrawals: the Web Portal, or in a WhatsApp chat with NMG Benefits, or using a form. We will communicate detailed instructions after 1 September 2024.

The current legislation will apply, so you will have the option to either withdraw your retirement savings as cash or transfer the funds into a preservation fund or another retirement fund.

If you resign or are dismissed or retrenched after the two-pot system is implemented, you will have different rules for the different pots:

• Vested pot - you will be allowed to take the money in your vested pot in cash, less fees and taxes, or you can keep it as “paid up” in the same fund, or you can transfer it to your retirement pot, or to preservation fund, or to a retirement annuity fund, or to the vested pot with your new employer’s retirement fund
• Savings pot - you will be allowed to take the money in your savings pot in cash as a withdrawal, less fees and taxes, or you can keep it as “paid up” in the same fund, or you can transfer it to your retirement pot, or to the savings pot in your new employer’s retirement fund, preservation fund, or retirement annuity fund
• Retirement pot - you will be allowed to keep the money in your retirement pot as “paid up” in the same fund or transfer it to the retirement pot in your in your employer’s fund, or to a preservation fund, or a retirement annuity fund. The money in your retirement pot must remain in your retirement pot until retirement age.

Your retirement savings will be in different pots, and there are different rules for each pot:

• Vested pot - when you retire, you will be able to take a portion of the money in your vested pot in cash, taxed according to the retirement lump sum tax table, and you will need to buy a pension product with the rest of the money (the compulsory annuitisation benefit). Specifically for provident fund members, the vested money (this is the contributions plus investment growth before 1 March 2021) can be taken out in cash, while two-thirds of the non-vested money (these are the contributions plus investment growth after 1 March 2021) must be used to buy a pension product*
• Savings pot - when you retire, the full amount available in your savings pot can be taken in cash and will be subject to tax according to the SARS retirement lump sum tax table. You could also transfer to your retirement pot which must be used to buy a pension product. 
• Retirement pot - when you retire, you must buy a pension product with the full amount available in your retirement pot. You cannot take the money in cash*

* If the combined value is less than R165 000 then it can be taken as cash, and taxed according to the SARS retirement lump sum tax table.

Any cash portion that is taken from your retirement benefit will be taxed. So, if you take cash from any of your pots when you retire then you will be taxed according to the SARS retirement lump sum tax table.