Currently, as a result of the T-Day changes effective from 1 March 2021, a member’s retirement savings may be split between Vested and Non-Vested benefits.

• The Vested benefits comprise a member’s accumulated retirement savings in a provident preservation fund and contributions to a provident fund prior to 1 March 2021 (known as T-Day), plus investment returns earned on these accumulated savings from T-Day onwards. For provident fund members who were 55 or older on T-Day and remain in the same provident fund, all retirement savings contributions made after T-Day (plus investment returns earned after that date) will also comprise Vested benefits. Up to 100% of Vested benefits may be taken as a cash lump sum benefit at retirement.
• The Non-Vested benefits comprise a member’s retirement savings in a pension fund, pension preservation fund, or retirement annuity fund. They also comprise a member's contributions to a provident fund from T-Day, plus investment returns earned on these savings accumulated from T-Day onwards if that member was younger than 55 on T-Day or was older than 55 and did not remain in the same provident fund after T-Day. At least two-thirds of Non-Vested benefits must be used to purchase an annuity at retirement (subject to a statutory commutation minimum).

The Two-Pot Retirement System will not affect a member’s rights to the retirement savings accumulated up to 31 August 2024. After the implementation date, all the member’s current rights of access will co-exist with the new Two-Pot system, whereby vested rights of members’ benefits will be retained. A member’s Vested benefits and Non-Vested benefits (less Seed Capital transferred to the Savings Component) will form part of the member’s Vested Component.

The Vested Component will comprise members’ accumulated retirement savings as at 31 August 2024, less an amount allocated to Seed Capital. It will also include the investment returns earned on these savings from 1 September 2024 onwards. This component will remain split into Vested and Non-Vested benefits according to the T-Day rules. Investment returns earned on each of the member’s Vested and Non-Vested benefit portions, from 1 September 2024, will continue to be allocated to those respective benefit portions. Any cash lump sum withdrawals (e.g., on resignation / dismissal / retrenchment / emigration) from the Vested Component will be taxed in accordance with the applicable lump sum withdrawal tax table.

Once the Two-Pot Retirement System is active, there will be no new contributions into the Vested Component. Only members of provident funds who were aged 55 years or older on T-Day, who remain in that same provident fund and who have not elected to be subject to the Two-Pot Retirement System may continue to make 100% of their contributions to the Vested Component on or after 1 September 2024. If these members elect to be subject to the Two-Pot Retirement System, within a period of 12 months from 1 September 2024. Seed Capital will be determined on the value of their benefits on the last day of the month in which they make their election. In addition, their contributions from the date of their election will be allocated one-third to their Savings Component, and two-thirds to their Retirement Component.

Vested Component:

Members will have all the same rights of access to the benefits in this component that they do currently.

• In the case of pension funds, members can still take their full cash lump sum on resignation from employment.
• In the case of pension and provident preservation funds and Retirement Annuity Funds, members can still take a cash lump sum withdrawal benefit on emigration, cessation of SA tax residence for a period or at least three years, or if the member is a non-resident on the expiry of their SA visa.
• In the case of Retirement Annuity Funds, members can still take their cash lump sum withdrawal benefit if the value across their three components is less than R15 000.
• Any cash lump sum withdrawal benefits taken by the member will be subject to tax in accordance with the lump sum withdrawal tax table (first R27 500 tax free).

Savings Component:

Members will have access to benefits in this component in cash at any time prior to retirement, but such pre-retirement withdrawals (known as ‘Savings Withdrawal Benefits’) will be allowed once per tax year only. The minimum amount that can be taken as a cash Savings Withdrawal Benefit is R2 000 before charges and transactions costs are deducted. The cash Savings Withdrawal Benefit will be taxed at the member’s marginal tax rate. In the event where a member terminates their membership and this member has already taken their one Savings Withdrawal benefit within the relevant tax year, an additional withdrawal will be allowed in that same tax year, provided that the balance in the Savings Component is less than R2 000.

Retirement Component:

The benefits in this component must be preserved until retirement and no withdrawals will be allowed from this component before retirement, except under exceptional circumstances. This component will only be accessible at retirement, on the death of the member, or prior to retirement, if:

• The member has formally emigrated or ceased their South African tax residency for a period of at least three years; or
• The member is a non-resident, and their SA work or visitor’s visa has expired.

Yes. The cost of withdrawals will be determined in the rules of the fund.

Vested Component

At retirement, a member will be able to take 100% of the Vested Benefits and up to one-third of the Non-Vested benefits as a cash lump sum retirement benefit, subject to tax.

The member will, however, be required to purchase an annuity with at least two-thirds of the Non-Vested benefits. A new commutation threshold will be introduced for members who wish to take their Non-Vested benefits in their Vested Component as a cash lump sum retirement benefit. They will only be able to commute their Non-Vested benefits in full if the member’s interest in the Retirement Component plus two-thirds of the member’s Non-Vested benefit in the Vested Component does not exceed R165 000.

Savings Component

Any benefits left in the Savings Component at retirement can be taken as a cash lump sum retirement benefit. These benefits may also be transferred to the Retirement Component at retirement and taken in the form of a compulsory annuity.

Retirement Component

100% of the benefits in the Retirement Component must be taken in the form of a compulsory annuity at retirement. The member will only be able to commute the benefits in their Retirement Component into a cash lump sum retirement benefit if the member’s interest in the Retirement Component plus two-thirds of the member's Non-Vested benefits in the Vested Component does not exceed R165 000.

Taxation of benefits taken at retirement

• Cash lump sum retirement benefits are subject to tax in accordance with the lump sum retirement tax table (where the first R550 000 is tax-free, applicable across all retirement benefits at all providers).
• Income received from the compulsory annuities will be subject to tax in accordance with the member’s marginal tax rate.

On the death of a member, the benefit payable is in respect of all three components, and the member’s beneficiaries, as determined in terms of section 37C of the Pension Funds Act, may choose to receive the benefits as:

• A cash lump sum death benefit; or
• A compulsory annuity; or
• A combination of both a cash lump sum and a compulsory annuity.

It has been confirmed that:

• Tax directives will be required for Savings Withdrawal Benefits. They must be applied for under an IRP3(a) form. SARS will require a member’s tax reference number and annual income for these tax directives.
• Tax directives will still be required for cash lump sum withdrawal benefits and cash lump sum retirement benefits. Tax directives will also be required for transfers to another fund. These tax directives must be applied for under the revised lump sum forms i.e., Forms A&D, Form B, Form C, and Recognition of Transfer ‘ROTs’, where applicable.
• Tax directives will not be required for:
  • Transfers of Seed Capital to the Savings Component.
  • Re-allocations of benefits in the same fund.