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New amendments to two-pot system aim to resolve anomalies in retirement fund seeding

New amendments to two-pot system aim to resolve anomalies in retirement fund seeding
Neesa Moodley
By Neesa Moodley
20 Dec 2024
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The proposed amendment, which is backdated and will be effective from 1 September 2024, removes the restriction that members in the affected age group must remain in the same fund. The amendments also change the effective seeding calculation date for members in this particular age category.

Three months after the two-pot system was implemented, the National Treasury and the South African Revenue Service (SARS) have proposed amendments — based on what they have observed.

How it was


Under the two pot system, anyone belonging to a provident or provident preservation fund and aged 55 or older on 1 March 2021, was allowed to choose to contribute to a “savings pot” within a year from 1 September 2024. Members of this age group were also told they had to remain in the same fund.

If you fall in the above category and you had opted in, a one-time seeding amount of 10% of the funds you had accumulated (the vested component) would be calculated, and the date of seeding calculation was to be 31 August 2023. The seeding amount is capped at R30,000.

Why it has been amended


However, the National Treasury and SARS say some retirement funds used the seeding date of 31 August 2024. This date was used when drafting their rules, communicated to fund members and used when making the seeding calculation for those members who have already opted in.

“This has created an anomaly for funds as two versions have been communicated to their members and incorporated into the fund’s rules. That is, for some members the seeding calculation was done on 31 August 2024, and for others, the seeding amount was calculated on the last day of the month the member elected to opt in,” an explanatory note from the National Treasury says.

What the amendments are


The proposed amendment, which is backdated and will be effective from 1 September 2024, removes the restriction that members in the affected age group must remain in the same fund. The amendments also change the effective seeding calculation date for members in this particular age category as follows:

  • 31 August 2024; or

  • The last day of the month in which the member makes the choice to opt in to the two-pot system; or

  • As determined by the fund rules.


The money is to be allocated to the savings pot with effect from the last day that the fund member chooses to opt in.

The amendment proposal will have the effect of aligning revenue laws with what retirement funds are implementing on the ground.

Members of the public and industry have the opportunity to make written submissions on these changes. Comments must be mailed to the National Treasury at [email protected] and SARS at [email protected] by close of business on Friday, 17 January 2025. Once feedback has been received, and taken into account, the draft Revenue Laws Amendment Bill will be tabled in Parliament during the 2025 Budget Review. DM

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