The Two-Pot Retirement System: Savings Withdrawals, Tax and Rules

As of October 2026, every active member of a South African pension, provident or retirement annuity fund covered by the reform has their retirement savings divided into up to three parts, often called pots. One of those parts can be accessed before retirement, once per tax year, with tax deducted.

This guide explains how the system is built, what the withdrawal and tax rules say, and what happens to each pot when a member resigns, is retrenched or retires. It is general information, not financial or legal advice.

Where the two-pot rules come from

The system was introduced by two Acts. The Revenue Laws Amendment Act 12 of 2024 changed the Income Tax Act and was signed on 11 June 2024. The Pension Funds Amendment Act 31 of 2024 amended the Pension Funds Act and the laws governing the Post Office, Transnet and Government Employees Pension Fund schemes, so public sector members are included.

The Pension Funds Amendment Act came into effect on 1 September 2024 under Proclamation Notice 175 of 2024, published in Government Gazette 51122 on 26 August 2024. The President signed the proclamation on 23 August 2024. Some government summaries list 23 August as the commencement date, but the proclamation itself fixes 1 September 2024. SARS also describes the system as applying from 1 September 2024.

The three components

National Treasury's two-pot FAQ (2024) describes the split this way: "A ratio of 1/3 (one-third) of total contributions will go into the savings component and 2/3 (two-third) of total contributions into the retirement component."

Seeding the savings pot

So that members had something to draw on from day one, each fund made a once-off transfer into the savings component. The amount was 10% of the member's fund value on 31 August 2024, or R30,000, whichever was lower. The rest stayed in the vested component.

Treasury's own examples: a member with R750,000 in the fund on 31 August 2024 received a seed of R30,000, because 10% (R75,000) was above the cap. A member with R200,000 received R20,000 (10%). The R30,000 figure is a cap on the one seed transfer only. It is not an annual allowance and not a limit on later withdrawals.

Who is included and who is not

Treasury states that the system applies to all active members of private sector and public sector retirement funds. The exclusions it lists are old generation or legacy retirement annuity policies, funds with no active participating members, and pensioners.

Members of provident funds who were 55 or older on 1 March 2021 and are still members of the same fund are also excluded, unless they elected to contribute to the new components within 12 months of 1 September 2024 (Revenue Laws Amendment Act 6 of 2025). That window has closed. National Treasury states that a member who opted in cannot reverse the decision.

Savings withdrawal rules

National Treasury summarises the rules plainly: the savings component "will be accessible at any time, but withdrawals must be a minimum of R2 000 and only one withdrawal may be made in a tax year." There is no maximum withdrawal limit apart from the balance in the savings component.

The once-per-tax-year limit applies fund by fund. The Presidency's statement on the Pension Funds Amendment Act says that "the ability to withdraw from the savings component will be applicable on a per fund or per contract basis." A member with a pension fund through work and a separate retirement annuity may make one withdrawal from each, if each fund's rules and systems allow it.

Withdrawals are processed by the fund, not by SARS or the Department of Employment and Labour. Each fund's rules had to be approved by the Financial Sector Conduct Authority, and National Treasury warned in July 2024 that not all funds would be able to process requests immediately. Processing times therefore vary by fund.

How a savings withdrawal is taxed

A savings withdrawal is added to taxable income and taxed at the member's marginal rate. SARS explains that it is taxed "using the annual payment/bonus tax calculation based on the taxpayer's marginal rate of tax. No retirement rates, allowable deductions, exemptions or tax-free amounts will be used in this calculation."

The practical steps that follow from the SARS rules are:

1. The member must be registered for income tax. SARS states that a tax directive "will not be granted without a valid tax reference number."
2. The fund applies to SARS for a tax directive (form IRP3(a)) before paying out.
3. SARS will not issue the directive if the member has outstanding tax returns.
4. If the member owes SARS money, SARS first deducts that debt from the payout, unless a payment arrangement is already in place.
5. The rest is paid by the fund, after its own administration costs.

The decision is final once the fund sends the directive application to SARS. In SARS's words: "Once your retirement fund sends your withdrawal directive application to SARS, your decision to withdraw becomes final."

Because the amount is taxed at the marginal rate, the tax taken can be higher for a member already in a higher income bracket.

Resignation, dismissal and retrenchment

Leaving a job affects each pot differently:

• Vested component: old rules apply. National Treasury states a member "still has full access to accumulated retirement savings (which will be in the vested component) when resigning", either as cash (subject to tax) or by transfer to another fund.
• Savings component: remains accessible after resignation, under the same once-per-tax-year, R2,000 minimum rules.
• Retirement component: cannot be taken in cash. SARS states it "cannot be taken as a lump sum if the member terminates membership in the fund before retirement as a result of resignation, dismissal, withdrawal or retrenchment and must be transferred to another fund."

Retrenchment is the least settled point. Treasury's two-pot FAQ (2024) said "Retrenchment cases will be dealt with in another phase of this reform process", while SARS lists retrenchment alongside resignation as a case where the retirement component must be transferred. No later primary-source change to the retrenchment rule was found for this guide, so members facing retrenchment should ask their fund how it applies the rules. For the separate employment protections that apply, see retrenchment and severance pay and UIF benefits.

At retirement

At retirement, SARS states the retirement component "will be used to pay the member a pension or purchase an annuity upon retirement, subject to certain exceptions." Whatever remains in the savings component may be added to the portion taken in cash.

When the reform was announced in the 2024 Budget, government stated that savings component money taken at retirement would be taxed under the retirement lump sum table. For the 2027 tax year (1 March 2026 to 28 February 2027), SARS's table taxes the first R550,000 at 0%, subject to any earlier lump sums. The vested component continues to follow the fund's pre-reform retirement rules.

Divorce

National Treasury's FAQ states that a divorce order applies proportionally across all the components. A non-member spouse's share is not drawn only from the savings component.

Changes since 2024

The Revenue Laws Amendment Act 6 of 2025 (assented to on 19 December 2025, Government Gazette 53916 of 24 December 2025) made technical amendments to the Income Tax Act and to the Revenue Laws Amendment Act 2024. These include changes to the savings component, vested component and retirement component definitions, mostly deemed effective from 1 September 2024, and a change to the retirement annuity fund definition from 1 March 2025. One of them set the 12-month opt-in deadline for older provident fund members described above.

This guide does not describe those technical changes in more detail because their effect on individual members depends on the fund's rules. No primary-source change was found to the R2,000 minimum, the once-per-tax-year rule, the one-third and two-thirds split or the seed cap as of October 2026.

Practical points before applying

Fees vary by fund. National Treasury said that "administration costs and tax at marginal rates will be deducted from such withdrawals." The law does not set a rand amount, and no statutory cap on these fees was found. Ask the fund or its administrator what it charges for a savings withdrawal before applying.

Withdrawn money stops growing in the fund. An amount taken from the savings component no longer earns investment returns towards retirement, and it is taxed on the way out. National Treasury urged members to get financial advice before making withdrawals. A registered financial adviser or the fund itself can explain the effect for a particular member.

Apply through the fund. Applications go through the retirement fund or its administrator, which then applies to SARS for the tax directive.

Short-term income support. For members who have lost their job, the UIF claim process is a separate benefit that does not draw on retirement savings. If a dismissal itself is in dispute, see unfair dismissal.

For the wider picture of employment rights, see the South Africa labour law section and the South Africa Laws hub.

This page is general legal information about South African law and is not legal or financial advice. For advice on your own situation, consult an attorney or a registered financial adviser, or contact Legal Aid South Africa on 0800 110 110 if you cannot afford an attorney.

Frequently Asked Questions

When did the two-pot retirement system start?

On 1 September 2024. Proclamation Notice 175 of 2024 (Government Gazette 51122 of 26 August 2024) set that date for the Pension Funds Amendment Act 31 of 2024. The proclamation was signed on 23 August 2024, which is why that date appears on some summaries.

What is the minimum two-pot savings withdrawal?

R2,000. National Treasury states there is no maximum withdrawal limit on the savings component apart from the balance available, and that only one withdrawal may be made in a tax year.

Can I withdraw from more than one retirement fund in the same tax year?

The Presidency stated that the ability to withdraw from the savings component applies on a per fund or per contract basis. A member of two funds may therefore make one savings withdrawal from each, subject to each fund's rules and processing.

How is a savings withdrawal taxed?

SARS taxes it at the member's marginal rate using the annual payment or bonus tax calculation. No retirement lump sum rates, deductions, exemptions or tax-free amounts apply. The fund must obtain a tax directive, and SARS first uses the payout to settle any tax debt unless a payment arrangement is in place.

Why do I need a tax number to withdraw from my savings pot?

SARS states that a tax directive will not be granted without a valid tax reference number, so the member must be registered for income tax. SARS also states that a directive will not be issued while returns are outstanding.

Can I take my retirement pot when I resign from a job?

No. The retirement component cannot be taken as cash on resignation, dismissal, withdrawal or retrenchment and must be transferred to another fund. The vested component still follows the old rules and may be taken in cash (taxed) or transferred, and the savings component stays accessible.

What happened to the provident fund money I had before September 2024?

It sits in the vested component, minus the once-off seed transfer to the savings component. Old rules continue to apply to it, and it keeps earning investment growth, but no new contributions are added to it.

Does the two-pot system apply to provident fund members over 55?

Members of provident funds who were 55 or older on 1 March 2021 and are still members of the same fund are excluded, unless they elected to contribute to the new components within 12 months of 1 September 2024 (Revenue Laws Amendment Act 6 of 2025). That window has closed. National Treasury states that a member who opted in cannot reverse that decision.

How much does my fund charge for a savings withdrawal?

It depends on the fund. National Treasury said administration costs and tax would be deducted from withdrawals, but no fixed fee is set in the law and no statutory cap was found. Ask the fund administrator what it charges before applying.