{"id":833709,"date":"2025-08-03T09:00:00","date_gmt":"2025-08-03T07:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=833709"},"modified":"2025-08-03T06:59:20","modified_gmt":"2025-08-03T04:59:20","slug":"allan-gray-explains-new-two-pot-retirement-changes-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/833709\/allan-gray-explains-new-two-pot-retirement-changes-in-south-africa\/","title":{"rendered":"Allan Gray explains new two-pot retirement changes in South Africa"},"content":{"rendered":"\n

South Africans have accessed billions of their retirement savings following the introduction of the two-pot system last year, but new 2025 laws will clarify some points of contention that have cropped up.<\/p>\n\n\n\n

Since its introduction, Allan Gray has processed roughly 25,000 savings component withdrawals across its five retirement funds, with an average gross withdrawal amount of R14,000. <\/p>\n\n\n\n

The two-pot system was enacted on 1 September 2024 and intends to help retirement fund members access funds during an emergency. <\/p>\n\n\n\n

One-third of all retirement contributions from 1 September 2024 were allocated to the \u201csavings component (pot). <\/p>\n\n\n\n

Members can withdraw up to 100% of what has accumulated in that component before retirement, with a minimum withdrawal of R2,000 that only occurs once per tax year. <\/p>\n\n\n\n

This withdrawal is taxed at the member\u2019s marginal tax rate in the year of withdrawal and will reduce the tax-free amount available to members at retirement. <\/p>\n\n\n\n

The \u201cretirement component\u201d will be inaccessible before the member retires, and holds of two-thirds of all retirement contributions from September 2024 onwards. <\/p>\n\n\n\n

The total amount in this component will then be used to buy an annuity-providing product at retirement, including a living annuity or guaranteed life annuity.<\/p>\n\n\n\n

Any savings before the September 2024 implementation are put in a third \u201cvested component\u201d, which will follow all previous retirement regulations. <\/p>\n\n\n\n

Allan Gray has repeatedly warned that members should avoid accessing their savings withdrawal benefit. On top of the tax hit, it can seriously diminish essential retirement savings for South Africans. <\/p>\n\n\n\n

The warnings from Allan Gray\u2019s have borne fruit, with other asset managers seeing far larger outflows. <\/p>\n\n\n\n

Alexforbes saw 348,000 claims being submitted by the end of 2024, amounting to over R6.5 billion. <\/p>\n\n\n\n

According to SARS commissioner Edward Kieswetter, South Africans had withdrawn R57 billion from their savings by June, netting the taxman R15 billion. <\/p>\n\n\n\n

New laws for South Africa <\/h2>\n\n\n
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Jaya Leibowitz – Allan Gray\u2019s retail legal team manager<\/figcaption><\/figure><\/div>\n\n\n

The National Assembly recently approved the 2025 Revenue Laws Amendment Bill, which includes changes to the two-pot retirement system in South Africa.<\/p>\n\n\n\n

Allan Gray\u2019s retail legal team manager, Jaya Leibowitz, said the 2025 Revenue Laws Amendment Bill does not introduce significant changes to the two-pot system. <\/p>\n\n\n\n

\u201cIt seeks to clarify ambiguities and correct technical drafting issues present in the Revenue Laws Amendment Act of 2024 and the Revenue Laws Second Amendment Act of 2024,\u201d said Leibowitz. <\/p>\n\n\n\n

For instance, the existing legislation states that deductions from member accounts made in terms of section 37D of the Pension Funds Act must be made from the three components of the member account on a proportional basis. <\/p>\n\n\n\n

However, deductions for maintenance claims were erroneously omitted. The new Bill now includes a reference to the applicable section of the Act to bring maintenance claims into scope.<\/p>\n\n\n\n

Secondly, the existing legislation excluded members of provident preservation funds who were over 55 on 1 March 2021. <\/p>\n\n\n\n

This was ambiguous, and industry members were applying the exclusion in varying ways.\u00a0\u00a0<\/p>\n\n\n\n

2021 brought major changes to provident funds, and prevented fund members from withdrawing their entire retirement savings as a lump sum, with at least two-thirds needing to go into an annuity. <\/p>\n\n\n\n

The 2025 Revenue Laws Amendment Bill states that all members of provident preservation funds who meet the age requirement are excluded from the two-pot system, unless they opt in. <\/p>\n\n\n\n

This is regardless of whether they were a member of that same fund on 1 March 2021. Given this is how Allan Gray interpreted the provision initially, the new Bill makes no difference to its members. <\/p>\n\n\n\n

Thirdly, the 2024 Revenue Laws Amendment Act stated that when provident and provident preservation fund members who met the age requirement decided to participate in the two-pot system, their savings component would be seeded based on the value of the member\u2019s account on 31 August 2024. <\/p>\n\n\n\n

The Second Amendment Act stated that this changed the reference date for calculating the seeding amount to the last day of the month in which the election to participate was made. <\/p>\n\n\n\n

However, the Second Amendment Act was only assented to and commenced in December 2024, almost four months after introducing the two-pot system, resulting in confusion across the industry. <\/p>\n\n\n\n

The 2025 Bill provides that the date to calculate the seeding amount is \u201c31 August 2024 or the last day of the month in which the election was made, or as may be determined by the rules of the fund.\u201d <\/p>\n\n\n\n

\u201cMembers in this group only have one more month to elect to participate in the two-pot system, said Leibowitz. <\/p>\n\n\n\n

\u201cIf they have not done so already, they should be aware that different funds will use different dates to calculate their seeding amount, depending on their rules. \u201c <\/p>\n\n\n\n

Allan Gray calculated the seeding amount using the value of the member\u2019s account on 31 August 2024 and will continue to do so until 31 August 2025.<\/p>\n\n\n\n

After passing through parliament, the Bill needs President Cyril Ramaphosa\u2019s signature to become law. <\/p>\n\n\n\n