Big retirement ‘gift’ for South African expats

South Africa’s new two-pot retirement system gives expats immediate access to their retirement funds—sidestepping the three-year lock-in rule—and many are taking advantage of this little boon.

According to experts at Tax Consulting SA, millions of South Africans have once again tapped into their retirement funds through the two-pot system, and expats have proven to be even more eager.

The new Two-Pot Retirement System, implemented on 1 September 2024, allows pension fund members to make one withdrawal from their savings per tax year.

This withdrawal can be made from their newly created Savings Pot—funds not subject to the same restrictive lock-in rules that govern other retirement savings for expats.

The tax experts explained that expats can access this money immediately because the Savings Pot is not subject to the three-year lock-in rule applicable to lump-sum withdrawals after ceasing tax residency. 

“For South Africans living abroad who have formally ceased tax residency, this is one of the few components of their retirement savings that remains accessible without delay,” they said.

Retirement fund administrators on the Retirement Matters Committee of the Actuarial Society of South Africa (ASSA) reported that around 75% of applications received in March and April 2025 were repeat claims.

This follows after more than 2.69 million South Africans accessed a part of their retirement savings under the Two Pot Retirement System in the tax year ending February 2025.

“South African expatriates residing abroad are among those who withdrew money from their Savings Component, which was seeded with up to 10% of their pension fund credit as of 31 August 2024, capped at R30,000,” the experts said. 

According to the experts, this indicates that many South Africans are eager to obtain extra cash as soon as possible.

The South African Revenue Service (SARS) noted that a gross lump sum of R47 billion was paid to fund members from their Savings Pot six months after implementing the Two Pot System on 1 September 2024.

This yielded nearly R12 billion in tax revenue, almost double the R5 billion initially projected by the National Treasury. 

Expat withdrawals not exempt from tax

Tax Consulting SA said that while the new system has benefits for expats, they are not exempt from the tax that comes with it. 

The experts warned that withdrawals from the Savings Pot come with conditions and stressed that expats must factor in tax obligations, administrative withdrawal fees, and cross-border transfer regulations. 

“While the funds are accessible, they’re not tax-free. Withdrawals are taxed at the individual’s marginal rate, and even non-resident taxpayers are liable for tax on South African-sourced income.”

They explained that this tax liability remains even after severing ties with the South African Revenue Service (SARS), which expats often do to protect their global income from being taxed by South Africa. 

Despite their non-resident status, SARS still considers withdrawals from local retirement savings as taxable events.

According to a recent media article from Alexforbes, over 33,000 withdrawal claims have already been received since the start of the 2025 tax year on 1 March. 

A previous firm survey revealed that 80% of members used their withdrawals for debt repayments and essential living expenses, a strong indicator of financial strain.

However, withdrawing money is only part of the process for expatriates. Tax Consulting SA said that banks must verify the source of the funds and require an Approval International Transfer (AIT) PIN from SARS before remitting money overseas.

Despite the hurdles, Tax Consulting SA pointed out that it offers many South Africans abroad a chance to unlock retirement savings without waiting years.