Member education

Understanding the Two-Pot Retirement System

A practical overview of how contributions are divided, how savings-component withdrawals work and what members should consider.

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How the system works

The Two-Pot Retirement System came into effect in South Africa on 1 September 2024.

It allows retirement fund members limited access to part of their retirement savings while requiring the balance to remain preserved for retirement.

New retirement fund contributions are generally divided as follows: one-third is allocated to the savings component and two-thirds is allocated to the retirement component.

Savings accumulated before 1 September 2024 are generally held in a vested component and remain subject to the applicable vested-rights rules.

A member may generally make one withdrawal from the savings component during each tax year, subject to a minimum withdrawal amount of R2,000 and the rules of the applicable retirement fund.

What Happens When a Member Withdraws?

A savings-component withdrawal is taxed at the member's marginal income-tax rate rather than under the retirement lump-sum tax tables.

The fund's administration fee may also be deducted. Where applicable, SARS may direct that outstanding tax debt be deducted before the remaining amount is paid.

The tax deducted through the directive is based on information available to SARS. The member's final tax position may be adjusted when the annual income-tax assessment is completed.

A withdrawal reduces the amount that remains invested for retirement and the future investment returns that could have been earned. Members should therefore consider the long-term effect carefully.

How to Apply for a Two-Pot Withdrawal

Step 1

Check the Available Balance

Confirm that sufficient money is available in the savings component and that the fund's minimum withdrawal requirement has been met.

Step 2

Confirm Tax Registration

The member must have a valid SARS tax reference number. Incorrect personal or tax information may delay or prevent the application from being processed.

Step 3

Submit the Application to the Fund

Apply through the retirement fund or its administrator rather than directly to SARS.

Personal information
Identity or passport details
Tax reference number
Withdrawal amount
Verified banking details
Supporting documents required by the fund
Acceptance of applicable tax and administration deductions

Step 4

Kula Partners Validates the Application

Verify the member's identity
Check membership information
Confirm the available savings-component balance
Review supporting documents
Verify banking information
Perform required fraud and risk checks

Step 5

Apply for the SARS Tax Directive

Once validated, the fund or administrator submits a tax directive request to SARS. The directive tells the fund how much tax must be deducted.

Step 6

Deduct Tax and Fees

Tax specified by SARS
Any applicable SARS debt reflected in the directive
The applicable fund or administration fee

Step 7

Pay the Net Benefit

The remaining amount is paid into the member's verified bank account. Timing depends on a complete application, successful identity and bank verification, the SARS directive, and fund rules and service standards.

Tax and Financial Advice Disclaimer

This information is provided for general educational purposes only and does not constitute financial, tax, legal or investment advice.

The tax consequences and financial impact of a withdrawal will depend on the member's personal circumstances, applicable legislation, fund rules and SARS requirements.

Members should consult their retirement fund or administrator and obtain advice from an appropriately qualified financial adviser or registered tax practitioner before making a withdrawal or other retirement fund decision.