‘Two-pot’ retirement system to kick in on 1 March 2024 – here’s how it will work

The long-awaited draft legislation with more details regarding the roll-out of the “two-pot” retirement system was published on Friday afternoon.

The changes are being introduced in response to consumers’ dire financial stress during the Covid pandemic, when many were unable to access their retirement savings despite having no other money to turn to. 

The implementation date remains 1 March 2024, and the financial services industry has been working behind the scenes to put things in place. 

Blessing Utete, managing executive of Old Mutual Corporate Consultants, says of the 650,000 members on its retirement fund book, he expects that about 350,000 will be able to access the minimum R2,000 on 1 March next year.

The 2023 Draft Revenue Laws Amendment Bill and 2023 Draft Revenue Administration and Pension Laws Amendment Bill together provide the necessary legislative amendments required to implement the first phase of the “two-pot” retirement system. Public comments received over the course of the past year have been taken into account.

The key changes introduced now include:

• Seed capital: retirement fund members will be able to access “seed capital” or a portion of their available balance on 1 March 2024. The seed capital will be a minimum of R2,000 or 10% of your savings in the “vested component” as at 29 February 2024, capped at R25,000. Any money withdrawn as seed capital on 1 March 2024 will be subject to the member’s income tax rate. So, income earners in the highest tax bracket will be taxed at 45%.


• Defined benefit funds will calculate the one-third contributions to the “savings component” based on one-third of the member’s pensionable service increase, and two-thirds contributions to the “retirement component” based on two-thirds of the member’s pensionable service increase with effect from 1 March 2024.


• Legacy retirement annuity funds will be exempt from the “two-pot” retirement system, as their inclusion would require a complete redesign of these already-complex retirement annuity fund policies. These are typically those retirement funds where members had to pay massive upfront commissions to financial advisers and were then tied into the policies with the threat of high “withdrawal penalties”. Utete advises that those with older retirement annuity policies check with their insurer or fund administrator to find out if their policy is included in the new two-pot system.


• Housing loans and guarantees: If an employer has granted a housing loan or guarantee to the employee, then the employee has to get the employer’s permission before exercising their right to withdraw money from their retirement savings. There must be sufficient value remaining in their retirement savings to meet the housing loan or guarantee provided.

Complementary measures