You, your RA, and the new rules of access

SOUTH Africa's two-pot retirement system, which became effective on September 1, 2024, introduced significant changes to how retirement savings are both managed and accessed.

- ALEX ODENDAAL

These reforms, which aim to balance the need for long-term retirement preservation with short-term flexibility and accessibility, are far-reaching and, as such, should be fully understood in the context of one’s wealth creation journey.

Under the two-pot system, retirement contributions are divided into three components:

1. Vested Component: This includes all retirement savings accumulated before September 1, 2024. These funds remain subject to the rules that were in place before the implementation of the two-pot system.

2. Savings Component: Starting from September 1, 2024, one-third of all new retirement contributions will be allocated to this component. It is designed to provide limited access to funds before retirement under specific conditions.

3. Retirement Component: The remaining two-thirds of new contributions will be preserved until retirement and must be used to purchase a retirement income product, such as an annuity. With this in mind, here are several key facts that retirement annuity investors need to know: