Dear in-service member

2024 is moving along briskly and as EPPF prepares for the two-pot retirement system, it is important that you’re familiar with what is being proposed. Here is a recap of the information that you need to know:

The two-pot retirement system is expected to take effect on 1 September 2024

EPPF is closely monitoring developments. The proposed implementation date has been amended to 1 September 2024 and we’re working to ensure readiness before that date. 

Legislation around the matter is still going through the relevant approval processes

The Revenue Laws Amendment Bill has been passed in the National Assembly. Usually, bills go through the National Assembly, then the National Council of Provinces before the President signs them into law as acts of legislation. In the recent Budget Speech, the Finance Minister referenced the two-pot retirement system, saying South Africans could participate from 1 September 2024.

The two-pot retirement system has implications for in-service members 

The aim of the two-pot retirement system is to allow in-service members early access to a portion of their retirement benefits while still in employment. 

Explainer on what’s expected to happen from 1 September 2024

On 1 September 2024, all in-service members will have a Vested Component (which will hold the in-service member’s benefits that have accrued up to 31 August 2024 once the contributions for August 2024 has been received and allocated), a Savings Component (which will include 10% of the benefits in the Vested Component but will be limited to R30 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 two-thirds of your 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 your marginal tax rate. We will need to apply for a tax directive on your behalf before the cash can be taken.

Important information on the amount you can withdraw 

If you have accrued more than R30 000.00 before 31 August 2024, you will have 10% of that amount, up to a maximum of R30 000.00, placed in your Savings Pot, allowing you to make a withdrawal from 1 September 2024 when the law is expected to come into effect. It’s important to understand that from 1 September 2024, all money in the Savings Pot (equivalent to one third of your monthly service) will be available for withdrawal once every tax year, provided there’s a minimum of R2 000.00. 

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 is that waiting for the amount to accumulate before withdrawing will allow you to withdraw an even higher sum, which may be more helpful to your plans.

Retirement benefit contributions made after 1 September 2024 

Contributions to retirement savings made after 1 September 2024 will be split into two pots:

It’s important to remember that EPPF is a defined benefit fund, this means we don’t simply split money but pensionable service as your benefit is calculated based on pensionable service. Your two pots will therefore only be filled from each month of service that you accrue from 1 September 2024. 

Different rules for each pot if you resign, are retrenched or dismissed

For the Savings Pot, if your employment is terminated for any reason (including resignation, retrenchment or dismissal), you may make a withdrawal from this pot if you did not make any withdrawal in that tax year. 

For the Vested Pot, similarly, if your employment is terminated for any reason, you may take the full benefit from this pot as a lump sum. 

For the Retirement Pot, if  your employment is terminated for any reason, you will not be allowed to take any portion of the benefit as a lump sum before retirement. The Retirement Pot will stay in the Fund until you retire and that will be used to provide you with a pension. 

You will also be allowed to transfer your benefits to another fund if your employment is terminated for any reason. 

Quick understanding of the aim of the two-pot retirement system 

• In the case of EPPF, as an in-service member you will be allowed to access a portion of your retirement benefits while you’re still employed.
• The intention is to help you preserve the greater amount of your retirement benefits, so you have a monthly pension to support you once you retire.

There is no action required from you at this stage

We have regular engagements with all stakeholders involved in the matter and will keep you updated as we go along. 

Kind regards
The EPPF team