The country is about four months away from the expected implementation of the two-pot retirement system. There is a lot of speculation in the media about how the system will work. Based on your enquiries to EPPF, we’ve put together some information to help you understand.

Here’s a recap of the impact to EPPF’s in-service members

The 2023 Draft Revenue Laws Amendment Bill and the 2023 Draft Revenue Administration and Pension Laws Amendment Bill include these two main aims of the proposed two-pot retirement system:

• To allow you, as an in-service member, to access a portion of your retirement benefits while still employed; and
• To help you preserve the greater amount of your retirement benefits, so you have a monthly pension to support you once you retire.

Importantly, the two-pot retirement system is still in proposal stage
The intention of National Treasury and the South African Revenue Service is that the two-pot retirement system will be effective from 1 March 2024. That’s why EPPF has begun planning and increasing your awareness about what’s expected.

On 1 March 2024, all in-service members will have a Vested Component (which will hold the in-service member’s benefits that have accrued up to 29 February 2024), a Savings Component (which will include 10% of the benefits in the Vested Component but will be limited to R25 000.00 as a once-off and thereafter one-third of the in-service member’s future service will be added), and a Retirement Component (which will start with nothing and then the in-service member’s two-thirds of service each month will be added).

As an in-service member, you’ll be allowed to make one withdrawal per tax year from the Savings Component. However, this withdrawal will not be allowed if you have less than R2 000.00 in your Savings Component. Also any withdrawal will be taxed as income at the in-service member’s marginal tax rate. The Fund will need to apply for a tax directive on your behalf before the cash can be taken.

Clarity on the maximum amount that can be withdrawn

In-service members who have accrued more than R25 000.00 in their vested pot before 29 February 2024 will have that amount placed in their savings pot, allowing them to make immediate withdrawal on 1 March 2024 when the law is expected to come into effect. It’s important to understand that from 1 March 2024, all money in the savings pot (a third of your monthly service) will be available for withdrawal once every tax year, provided there’s a minimum of R2 000.00. There’s no maximum limit).

It's always better to preserve your money for a rainy day

If your one third in the savings pot is more than R2 000.00 at any point and you haven’t taken your withdrawal for that year, then you can withdraw the full amount irrespective of its value. What’s important to bear in mind that waiting for accumulation before withdrawing will allow you to withdraw an even higher amount, which may be more beneficial to your plans.

Retirement benefit contributions made after 1 March 2024

Contributions to retirement savings made after 1 March will be split into two parts. 

The one important point to remember is that EPPF is a defined benefit fund, so your two pots will only be filled from each month of additional service that you accrue from 1 March 2024. 

There’s no action required from you as an in-service member at this stage

EPPF will continue to update you as the proposal moves through the legislative process. We’ll also have ongoing online and in-person member engagement sessions.