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What you need to know about the ‘two-pot’ retirement system

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Pension reforms reached another milestone this week as the National Council of Provinces (NCOP) adopted the latest changes to the Pension Funds Amendment Bill.

This means South Africans could soon be able to tap into their retirement savings or pension funds while still employed.

The amendments made to the bill by the National Assembly and NCOP ensure that government employees, Transnet, post, and telecommunications pension funds are included in the “two-pot” reforms.

They also concern important amendments in dealing with divorce and separation of assets.

Under the proposed law, accessing a portion of one’s pension could be possible by 1 September – if the bill finally gets assented into law by President Cyril Ramaphosa, once both houses adopt the changes.

But it could take a few months, as the changes adopted by the NCOP this week still require further consideration by the National Assembly’s standing committee on finance.


The landmark bill was first introduced by Finance Minister Enoch Godongwana in February during his Budget Speech.

The objective was to try and ease the financial pressures on South Africans by allowing them to access their pension savings.

The amendment is referred to as the “two-pot” system because retirement savings are separated into two pots, namely a savings pot, and a retirement pot.

The legislation also allows pension fund members to withdraw, but there are minimum limits on the amount and the number of times a fund member can make withdrawals.

According to the new system, two-thirds will go into a retirement pot, which cannot be touched until retirement. All future growth and earnings are to remain in the retirement pot until retirement.

One-third of contributions by members will then go into a “savings pot”, which can be accessed by members.

The exact date a person can make their first withdrawal is dependent on the retirement fund.


The two-pot system has been widely welcomed by most parties represented in Parliament. Trade unions have also praised the passing of the amendments by Parliament.

Parliamentary coordinator for the Congress of South African Trade Unions (COSATU), Matthew Parks, said workers were highly indebted due to slow economic growth, and the rising costs of living.

“The current pension laws are excessively inflexible, only allowing workers access to their pension funds upon retirement, losing their job, or resignation.

Consequently, many workers opt to resign to cash out their entire pension funds, leaving them unemployed and with no savings left,” said Parks.

However, some legislators have warned against withdrawing without understanding the tax implications.

Chairperson of the Select Committee on Public Enterprises and Communication, Mmamora Mamaregane, said people should be educated about the tax implications.

“National Treasury and SARS [South African Revenue Service] should monitor the tax implication on individuals and the State, with the view of easing the tax burden on withdrawals made in terms of the two-pot system”, said Mamaregane.

While the new system has political support, some industry players are sceptical.

The Association of Savings and Investment in South Africa earlier warned the standing committee on finance that the bill clashes with divorce orders that give ex-spouses access to a former partner’s pension.

The Institute of Retirement Funds, on the other hand, said it feared there would not be enough time to adjust administrative systems to give effect to the bill before September.

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