Starting June 1, 2025, South Africa’s retirement system will undergo one of its most significant reforms in decades. The introduction of the “two-pot retirement system” will directly impact millions of workers, fund members, and future retirees. If you’re contributing to a pension or retirement fund, or planning to do so, here’s what you need to know about how the changes will affect you.
What Is the Two-Pot System?
The two-pot system is a new way of structuring retirement savings. Under the current framework, most individuals can only access their retirement funds upon resignation, retrenchment, or retirement. This often leads people to cash out early, compromising their long-term financial security.
Under the new system, your monthly retirement contributions will be split into two parts:
- Two-thirds of your contributions will go into a “retirement pot”. This portion remains locked in until you reach retirement age and cannot be accessed beforehand.
- The remaining one-third will be placed in a “savings pot”, which can be accessed once per year under specific conditions.
This new arrangement aims to strike a balance between financial flexibility and retirement preservation.
Who Will Be Affected?
The new rules will apply to all active members of retirement funds in South Africa including pension, provident, and retirement annuity funds. Employees in formal employment, the self-employed, and fund administrators will all be required to adjust to this new structure.
Importantly, any funds saved before June 1, 2025, will be ring-fenced under existing rules. This means you won’t be able to access those savings through the new system. Only contributions made after the implementation date will be subject to the two-pot split.
How Withdrawals Will Work
Starting in June, members can make one withdrawal per tax year from the savings pot, provided the amount is at least R2,000. You must also leave a minimum of R2,000 remaining in the pot after the withdrawal.
Withdrawals will be taxed as regular income, based on your marginal rate, which may reduce the net amount you receive. So, while the system introduces more flexibility, it comes with guardrails to prevent misuse and encourage financial discipline.
Why the System Is Changing
The South African government has introduced this reform to address a long-standing issue: too many workers cash out their retirement funds entirely when they change jobs. This leads to a cycle of under-saving and financial instability in later life.
The two-pot system aims to preserve the core of your retirement savings while allowing limited, controlled access to a smaller portion. It’s a strategy designed to build financial resilience, especially in a country where many households struggle with debt and unexpected expenses.
An Example to Consider
Suppose you’re contributing R3,000 per month to your retirement fund. Under the two-pot system, R2,000 would go into the retirement pot and R1,000 into the savings pot. If an emergency arises next year, you could choose to withdraw up to the available amount in the savings pot (provided it meets the rules), but not from the retirement portion.
This ensures that your core retirement capital continues to grow untouched, while still giving you some breathing room during financial stress.
What Should You Do Now?
First, speak to your HR department or retirement fund provider to confirm how your contributions will be restructured from June 1. Fund administrators are already preparing to adapt systems and educate members, but it’s wise to stay informed.
Next, consider speaking to a financial advisor about how these changes fit into your broader financial goals. Annual withdrawals from your savings pot may seem tempting, but they should be used carefully. Treat this access as a backup plan, not a regular income stream.
Looking Ahead
The success of the two-pot system will depend not just on the rules themselves, but on how well individuals adapt to the new mindset it promotes: balancing access with discipline.
For many South Africans, this reform could be a lifeline during tough times without sacrificing long-term security. But it will also require greater financial awareness, better planning, and more responsible decision-making.
June 1 marks a new era in retirement planning for South Africa. Whether you’re just starting out or nearing retirement, now is the time to review your financial strategy and prepare for the changes ahead.