Retirement planning: Growing in Complexity

Geo Botha • May 6, 2025

As of from September last year we have seen a change in regulations and the new: “2 Post system” was implemented across all retirement products, whether you belong to a Pension fund, Provident fund, or Retirement annuity.  The creation of the 2 new pots, essentially leaves you now with 3 Potts: 

  1. The Vested Pott: This was the balance of you accumulated fund up until September 2024. This Pott will still be governed as per the old rules of the specific product.
  2. The Savings (Emergency) Pot: With a once boost of 10% (up to a Max of R30 000) of your vested pot. The Savings pot is open for you to make one withdrawal per annum. One Third off all your contributions from September 2024 will go into this pot. Very important to note that if you withdraw from this pot, you will be taxed at your marginal income tax rate immediately, whereafter the balance will be transferred to you
  3. The retirement Pot: The other two thirds of your retirement contributions from September 2024 will go into this pot. This money cannot be accessed before retirement and an annuity will have to be bought after retirement

 

As of January 31, 2025, the South African Revenue Service (SARS) reported that R43.42 billion had been paid out from the two-pot retirement system's savings pot. This involved 2.4 million applications for tax directives, with 2.4 million directives approved. The remaining applications were declined due to various reasons, including incorrect identification or tax numbers.

 

It is very important to take the long-term effect of any action you take into consideration, and this is where a financial advisor can really add value: To minimise you tax liability and to ensure you have peace of mind in the years leading up to retirement and the years in retirement.

 

Different options are available once retired: Life Annuity Vs. Living Annuity, each with its pros and cons and careful considerations and comparisons should be made before deciding on a retirement product.

 

Kindly contact us for any questions or comments at admin@bovest.co.za

 

Geo Botha CFP®

Director and Wealth Manager

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