How to apply for two-pot system

The two-pot retirement system in South Africa, implemented in March 2024, allows retirement fund members to access a portion of their savings for emergencies while preserving the rest for retirement. Here’s a step-by-step guide to apply or shift your retirement savings into this system:

Step-by-Step Process to Apply for the Two-Pot System in South Africa

1. Understand the Two-Pot System:

• The system divides retirement savings into two components:
  1. Accessible Pot (One-third): You can access this pot for emergency withdrawals, but it is subject to taxation.
  2. Preservation Pot (Two-thirds): This part remains preserved until retirement, age 55 or later, with no option to access it early.

1. Check Eligibility:

• The system applies to members of retirement funds, including pension, provident, and retirement annuity funds.
• Your contributions after March 1, 2024, are eligible for the two-pot system.

1. Consult Your Retirement Fund:

• Contact your employer or retirement fund administrator to verify if your retirement fund has adopted the two-pot system.
• If it hasn’t been adopted yet, inquire about the timelines for implementation.

1. Review Your Retirement Fund Rules:

• Every retirement fund may have specific rules regarding how the two-pot system is implemented. Ask for an explanation of these rules, including any conditions for withdrawals or fund adjustments.

1. Make the Necessary Contributions:

• After March 2024, ensure that a portion of your contributions is allocated to the two pots (one-third to the accessible pot and two-thirds to the preservation pot).
• Contributions made before March 2024 will be preserved in your current fund and can’t be accessed until retirement.

1. Accessing Funds from the Accessible Pot:

• If you need to access money for an emergency, follow these steps:
  1. Submit a Request: Complete the withdrawal form provided by your retirement fund administrator. Provide proof of the emergency if required.
  2. Tax Implications: Be aware that withdrawals are subject to income tax. Understand how much you’ll be taxed based on the amount withdrawn.
  3. Fund Processing: The retirement fund will review and process your request. There may be a waiting period before you receive the funds.

1. Consider Financial Advice:

• It’s important to consult a financial advisor before making withdrawals. They can help you understand the impact on your long-term retirement goals and any tax liabilities.

1. Monitor Your Fund Statements:

• Keep track of your contributions and balances in both pots to ensure everything is in order.
• You should also regularly review your retirement fund statements to ensure that your contributions are being allocated correctly between the two pots.

1. Stay Updated on Changes:

• The two-pot system may undergo future adjustments as the South African government refines the regulations. Ensure you stay informed by checking updates from your retirement fund or consulting with a financial advisor.

By following these steps, you can ensure that you’re applying for the two-pot system properly and managing your retirement savings effectively.