The new two-pot retirement reform that will allow access to a portion of one’s retirement savings before retirement will be effective from 1 September 2024.

Finance Minister Enoch Godongwana announced during his 2024 Budget address that progress has been made in introducing the scheme, first mooted in June 2023. The scheme was originally set for implementation from 1 March 2024.

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It essentially means contributions to retirement funds will be split, with one-third going into a ‘savings component’ and two-thirds going into a ‘retirement component.’

Godongwana says the two-pot system ensures that there is a balance between preserving contributions to safeguard a better retirement for fund members, while addressing the plight of those who need to access some funds to help ease their financial burden in times of distress.

The first cash withdrawals could be made from the savings pot as of 1 September 2024.

Retirement fund members will be able to withdraw amounts from the savings component before retirement, while the retirement component will remain protected.

Savings accumulated up to the date of implementation will not be affected, except for the initial seed capital amount.

This amount will be the lower of 10% of the fund value on 31 August 2024 or R30 000, and will be transferred from accumulated retirement savings to the savings component to assist fund members who may prefer an immediate withdrawal due to a financial emergency.

This seeding will be a once-off event. If not used, it will still be available in the future.

Pre-retirement withdrawals from the savings component will be taxed at marginal rates, like all other income. However, when taxable income is lower, taxpayers will be taxed at lower rates.

Only one withdrawal may take place in a tax year, and the minimum withdrawal amount is R2 000.

The optimal option is still to preserve retirement savings as long as possible, as the amounts grow at compound rates and can attract lower tax rates.

The National Treasury says amounts left in the savings component on retirement can be withdrawn and will be taxed according to the retirement lump sum table, which includes a tax-free lump sum of R550 000.

An estimated R5 billion is likely to be raised in 2024/25 due to tax collected as fund members access once-off withdrawals due to the two-pot retirement reform.