Two-pot truths for SA's burning retirement questions

Johannesburg - Just over a month into the rollout of South Africa’s Two-pot retirement system thousands of citizens have navigated the withdrawal process looking for short-term financial relief. Many are asking how this system will affect their future, from tax concerns to the impact on long-term planning.

Lize De La Harpe, Senior Legal Advisor at Sanlam Corporate, has been fielding many questions. “The Two-pot system is a game-changer, providing access to funds for urgent financial pressures. But we also need to think beyond today. Are we solving today’s problems at the cost of tomorrow’s security? Understanding how this new system works is critical to making smart, informed decisions that protect both short-term needs and long-term financial well-being.”

Here’s a look at some of the more unusual but still highly relevant questions South Africans are asking:

Top 6 Two-pot questions explained

1. Are deferred retirees excluded from of the Two-pot system?

Not at all! Only those who are already drawing a pension are excluded. Deferred retirees – those who’ve retired but kept their benefits in the fund – are automatically included in the Two-pot system. So are deferred pensioners who left their jobs but didn’t cash out. Their fund credit will be split into two pots, giving them access to short-term savings while keeping their future in focus.

2. I didn't realise how much tax I would pay on my emergency savings pot withdrawal. Can I cancel my withdrawal request?
   No. Fund administrators must request a tax directive from SARS when you submit a claim from your emergency savings pot. A tax directive is “final” – once issued, the fund administrator must pay the member’s tax liability in terms of the SARS’s tax directive directly to SARS, failing which it would be liable to pay a penalty to SARS. SARS will only allow the cancellation of tax directive applications where a bona fide mistake has been made.
3. I have an overdraft on my bank account so I know that once my savings pot withdrawal payout hits my account the bank will deduct what I owe them. I desperately need this money. Can I ask the fund to pay my savings pot withdrawal claim to my spouse's bank account instead?
   No. The Pension Funds Act specifically prohibits payments of pension fund monies to third party bank accounts.
4. Can I cash out part of my vested component when I resign and leave the rest in the fund?

No. If you take a portion of your vested component in cash, the rest of it, along with your savings and retirement components, must be transferred to a new fund. However, you can preserve the other two components within the same fund if you cash out the entire vested component.

5. What if I get retrenched? Can I access all of my money?

No. Retrenched workers can only access their vested component and, in some cases, their emergency savings component (if you haven't made any withdrawals that tax year or your emergency component or the balance is less than R2 000, you can dip into it for relief). The retirement component remains locked up for the long haul – so you’ll still have that safety net in place for the future.

6. I’m over 55 and a provident fund member. Does the Two-pot system apply to me?

If you were a member of a provident fund or provident preservation who was over 55 on T-day (1 March 2021) and remained a member of the same fund, you are automatically excluded from the Two-pot system – unless you opt-in within 12 months. However, keep in mind that if you transfer to a new fund, you'll automatically be included in the system going forward. So, it's worth thinking carefully about your choices. There is flexibility, but ensure you understand the full picture before deciding.

De La Harpe’s advice? “This system offers alternative opportunities, but members must try to take a long-term view. Each decision – especially deciding whether to withdraw funds now – can significantly impact your future financial security.”

She advises South Africans to seek professional financial advice and weigh their options carefully.