Understanding the Two-Pot Retirement System

The two-pot retirement system changed how South Africans interact with their retirement savings. Contributions are split, part of the money becomes accessible before retirement, and the rest is preserved until you actually stop working.

The accessible portion is useful in a genuine emergency. It is also easy to treat as a savings account, which is where the long-term damage happens. Money withdrawn early loses the growth it would have earned over the remaining years, and that lost growth is usually far larger than the amount taken out.

Before withdrawing, three questions are worth answering honestly. Is this an emergency or a preference? Is there a cheaper source of funds available? And what will this cost me at retirement, in rands rather than percentages?

Tax also applies to withdrawals from the accessible component, so the amount that reaches your bank account is smaller than the balance you see on a statement.

If you are weighing up a withdrawal, speak to us first. A short conversation often reveals an option that leaves your retirement savings intact.

This article provides general information and does not constitute personalised financial advice.