contact us
contact us
KZNCIPF

The two-pot system for retirement savings

New legislation for retirement funds, called the Two-pot system will be implemented from 1 September 2024
Download Withdrawl Form

Why is the two pot system being introduced?

During stressful financial times, retirement fund members often resign so they can access their retirement savings.

The new two-pot system will give members of pension, provident and retirement annuity funds access to short-term financial relief in an emergency as they will be able to withdraw some of their retirement savings before they retire.

How will it work?

From the 01 September 2024, your retirement fund savings and monthly contribution will be allocated to three pots.

1. Vested Pot

  1. Your accumulated retirement savings up to 31 August 2024 will be allocated to the Vested pot and will not be affected by the two-pot system.
  2. From 1 September 2024 you will not be able to make any more contributions to your Vested pot.
  3. At retirement, the savings in you Vested pot benefit will be paid according to the fund rules
  4. The draft Bill proposes that 10% of your Vested pot on 31 August 2024, up to a maximum of R30 000, will be transferred to your emergency savings pot as a starting balance.
  5. Your Vested pot will continue to grow with investment returns.

2. Emergency Savings Pot

  1. 33% of your net fund contributions will be allocated to your emergency savings pot.
  2. This pot will grow with monthly contributions and investment returns.
  3. At retirement, the balance in this pot can be paid as a lump sum and taxed or used to buy a pension
  4. You can make one withdrawal from this pot in a tax year.
    The minimum withdrawal amount is R2 000.
    • The maximum withdrawal amount is what is available in your emergency savings pot .
    • PAYE tax plus an administration fee will be deducted before it is paid out.

Important: there are financial consequences to withdrawals

The goal of your retirement savings is to pay you a pension when you are no longer working. If you withdraw money from your retirement savings. You will lose out on the compound growth you would earn by saving this money and you will have less money to live on when you retire.

This could negatively affect your retirement plans. The emergency savings pot is there to help you cope with financial emergencies and not to pay for a new car or an expensive holiday. You are encouraged to preserve your savings for retirement.

3. Retirement Pot

  1. 67% of your net fund contribution will go to your retirement pot.
  2. This pot will grow with monthly contributions and investment returns.
  3. The total balance in your Retirement pot must be used to buy a pension at retirement. If your balance is less than R165 000 it can be taken in cash.
  4. No withdrawals can be made from this pot.


55+ Provident fund members have a choice

  • Provident fund members who were 55 years or older on the 1 March 2021 and who remained members of the fund until 1 September2024 ( referred to as members 55+)can:


Stay in the vested pot

  • There members will continue making contributions to their Vested pot according to their current fund rules.
  • At retirement, any amount in their Vested pot can be taken in cash(taxed) with the balance used to buy a pension.

OR

Move to the two-pot system

  • On the first of the month following a decision to move to the two-pot system, these members will start contributing to the new emergency savings and Retirement pots and will able to make one withdrawal per tax year from their Emergency Savings pot(see above for more information).
  • This decision needs to be made before the 1 September 2025 and it is a once off decision.
  • These members will still be able to take their Vested pot cash should they resign before retirement.


Important Notes

  • This option is not available to 55+ members of a pension fund, which means these members will automatically participate in the two-pot system.
  • Members who are 55 and older should be encouraged to preserve as much as possible for their retirement.

Any withdrawals will mean less money retirement

THE TWO-POT SYSTEM IS NOT AVAILABLE TO:

  1. Unclaimed members
  2. Pensioners
  3. Deferred pensioners, i.e members who have retired but who have not elected to receive their retirement benefits.
  4. Beneficiary fund members.
Download Withdrawl Form

Interested?

We are committed to providing you with timely and helpful support, so please provide us with as much information as possible when contacting us. Our customer service team is available to help with any questions or issues you may have, and we will do our best to respond to your message promptly.

contact us

About us

The Fund is a Defined Contribution Provident Fund, which means that the contribution levels (both member and employer) to the Fund are defined at the outset.

Contact NUmbers

Telephone: 031 362 0700
Email: clothingpf.kzn@nbc.org.za

Contact Address

Physical Address: Ground Floor James Bolton Hall, 127/129 Magwaza Maphalala Street (formerly Gale Street), Durban, 4001

Quick Links

Copyright 2023 | KAZ CIPF | All Rights Reserved