The Two-pot System
Introduction
On 29 July 2022, National Treasury issued a media statement on the draft tax bills released for public comment.
The media statement set out National Treasury’s proposal on promoting the preservation of retirement savings until retirement, coupled with access to a portion of retirement savings before retirement.
This proposed new system is called the “Two-pot system” and is scheduled to come into effect on 1 March 2023. However, the implementation date is likely to be delayed, to allow sufficient time for fund rules, administration, and SARS systems to be aligned.
National Treasury has requested that public comments be submitted to them by no later than 29 August 2022. The draft bill may be revised dependent on the feedback received from the industry.
The Two-pot system – basic construction
The Two-pot system introduces a ‘retirement’ and a ‘savings’ pot, with effect from 1 March 2023.
The composition of each of these pots is shown hereunder:
NOTE: It is important to note that the proposal of the Two-pot system does not mean that members will be able to access existing accumulated retirement benefits whilst still in service.
The Two-pot system and existing funds
Existing funds as at 28 February 2023 will remain intact.
Contributions plus growth thereon remain protected and the conditions attached to those contributions, remain in place.
These conditions came into effect on T-Day, 1 March 2021.
The T-Day changes resulted in retirement funds holding the following accounts:
- Vested benefits
- Non-vested benefits
- Benefits in respect of members over age 55 on 1 March 2021.
Under the two-pot system, these (T-Day) funds are referred to collectively as the “vested-pot”.
Each member’s record from March 2023 may therefore have three pots:
NOTE:
The protection offered to such members continues to be provided under the Two-pot system. However, this concession is to be clarified.
Pre-retirement withdrawals
The following depicts the options available on pre-retirement withdrawal for each of these three pots:
Transfers between pots
NOTE: Transfer to another retirement fund is allowed. The retirement and savings pot cannot be split and transferred into two different retirement funds i.e. these two pots must be transferred to the same fund.
Retirement
The following depicts the options available on retirement for each of these three pots:
Contact your GTC advisor or one of our benefit consultants for more information.
To watch GTC’s six-minute video, detailing the basic construction of the Two-pot system and how it will affects exit options – withdrawals/retirement, click here
Click here to download a written summary of the Two-pot system.
