Everything South Africans Need to Know About the Two-Pot Retirement System (2025 Update)
- Bryden Nair
- Jun 2
- 3 min read
South Africa's retirement landscape is undergoing one of its most significant reforms in years: the introduction of the two-pot retirement system. The system officially comes into effect on 1 September 2024, but as we approach mid-2025, many South Africans still have questions about how it works, how it affects their existing retirement savings, and what the tax implications are.
At Horizon Trading Solutions, we’ve been guiding our clients through the complexities of the two-pot system — and today, we're breaking it down in simple, practical terms.
🔎 What Is the Two-Pot Retirement System?
In short: The two-pot system divides your retirement savings into three distinct components:
1️⃣ Vested Pot – savings you’ve built up until 31 August 2024 (before the new system starts).
2️⃣ Savings Pot – one-third of future retirement contributions, which can be partially accessed before retirement.
3️⃣ Retirement Pot – two-thirds of future retirement contributions, which remains locked until retirement.
The main aim of the reform is to strike a balance between long-term retirement security and allowing limited access to funds when people face financial distress.
💡 Why Was the System Introduced?
For years, many South Africans were forced to resign from their jobs to access their retirement savings during financial hardship. The two-pot system:
Allows limited access to retirement funds without resigning.
Encourages preservation of the majority of retirement savings.
Helps households handle short-term financial emergencies more responsibly.
📊 How Much Can You Access (and When)?
You can withdraw from your Savings Pot once per year.
The minimum withdrawal amount is R2,000.
The maximum is limited to whatever balance you have available in your Savings Pot at the time.
The Retirement Pot remains preserved for retirement only.
⚠ Important:
Withdrawals from the Savings Pot are fully taxable at your marginal income tax rate.
Your Vested Pot remains subject to the existing withdrawal and retirement rules.
🔢 Example
Let’s say:
You earn R30,000 per month.
Your employer contributes 15% to your retirement fund.
Of this 15%, 10% goes to your Retirement Pot and 5% to your Savings Pot (following the two-thirds/one-third rule).
If your Savings Pot grows to R50,000, you could choose to withdraw any amount up to R50,000 once in a tax year, provided it's more than R2,000.
🧾 What Are the Tax Implications?
Withdrawals from the Savings Pot are taxed as income, not lump sum withdrawal tax.
Retirement Pot withdrawals at retirement will still be taxed according to the retirement lump sum tax tables.
Your Vested Pot keeps its original tax treatment.
👉 Key takeaway: Early access comes at a tax cost, so plan carefully to avoid unnecessary tax erosion.
🏦 How Will This Affect Your Current Retirement Fund?
Your existing fund will be automatically split into Vested and future contributions.
There is also a once-off "seed capital" transfer: up to 10% (max R30,000) of your Vested Pot may be transferred into your Savings Pot when the system starts.
This allows some immediate access to funds if needed.
🚩 Potential Pitfalls to Avoid
Frequent withdrawals can severely reduce your retirement nest egg.
Not understanding the tax consequences may result in unpleasant surprises.
Poor record-keeping of withdrawals could complicate your tax returns.
✅ How to Prepare Yourself
At Horizon Trading Solutions, we recommend you:
Review your retirement fund statements carefully.
Consult a tax or financial advisor before making any withdrawals.
Ensure your payroll department implements the changes correctly.
Budget for any potential tax liabilities.
🔧 How We Can Help
Navigating the two-pot system isn’t just about compliance — it’s about making smart financial choices that secure both your present and your future.
✅ Tax planning for withdrawals
✅ Retirement fund statement reviews
✅ SARS compliance assistance
✅ Long-term financial strategy
📞 Contact Horizon Trading Solutions today for professional retirement and tax advisory services.
📌 Final Thoughts
The two-pot retirement system introduces flexibility, but with flexibility comes responsibility. Understanding the rules now can prevent regrets later.
The best time to plan for your retirement is always — right now.
Comments