South Africa’s New Pension System Effective September 1, 2024

The South African government is introducing a new two-pot retirement system, scheduled to take effect on September 1, 2024. This system aims to improve financial security and flexibility for South African retirement fund members.

The system will split retirement savings into two components – a Retirement Pot and a Savings Pot.

• Effective September 1, 2024, Two-thirds of new contributions will go into the Retirement Pot and cannot be accessed until retirement.
• The remaining one-third of new contributions will go into the Savings Pot and can be accessed before retirement for emergencies.
• As of August 31, 2024, existing retirement savings will be placed in a “Vested Pot” and will follow current rules.

Ten percent of the Vested Pot balance as of August 31, 2024, will be transferred to the Savings Pot as “seed capital” when the system is implemented, up to a maximum of R30,000. Any withdrawal from the Savings Pot will be taxed at the member’s marginal income tax rate. 1. Members can only make one withdrawal from the Savings Pot per tax year, with a minimum withdrawal of R2,000.

The new system will apply to all types of retirement funds, including pension, provident, retirement annuity, and preservation funds. Provident fund members over 55 years old on September 1, 2024, can choose to continue with the old system or adopt the new one.

The system aims to promote the preservation of retirement savings while allowing some flexibility for financial emergencies. It’s important to note that these changes are still subject to final regulations and industry readiness. Read the full report.

Watch videos on the Two-Pot Retirement system here in English and Zulu.

 

This information about South Africa’s new pension system was provided by Tennant. If you need help with your employee benefits in South Africa, feel free to contact Asinta, and we will connect you to the local employee benefits experts at Tennant.