Dear In-Service Member

The country is about four months away from the expected implementation date of the two-pot retirement system. Based on your enquiries to EPPF, we’ve put together some information to improve your understanding.

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 save the greater amount of your retirement benefits, so you have a monthly pension to support you when 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 we’ve 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 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.

Clarity on the maximum amount that can be withdrawn

If you have accrued more than R25 000.00 before 29 February 2024, you will have 10% of that amount, up to a maximum of R25 000.00, placed in your Savings Pot, allowing you to make an 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 (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. At this stage, there’s no maximum limit to the amount that you may withdraw from their Savings Pot.

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 March 2024 

Contributions to retirement savings made after 1 March 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 service as your benefit is calculated based on service. Your two pots will therefore only be filled from each month of service that you accrue from 1 March 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. 

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

We 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.

If you missed previous communication on the two-pot retirement system, read it here.

Kind regards

The EPPF Team