South Africa | Understanding the South African Two-Pot Retirement System: Impact on Payroll and Taxes 

From 1 September 2024, South Africa’s retirement landscape will change with the implementation of the Two-Pot Retirement System, affecting both payroll and taxes. Here’s what you need to know. 

What is the two-pot retirement system?  

From 1 September 2024, provident, pension, and retirement fund contributions will be split: 

• One-third to a savings pot 

• Two-thirds to a retirement pot for purchasing a pension product at retirement 

Retirement Savings Components explained. 

1. Vested pot: 

• Contributions made before 1 September 2024 (vested rights as of 31 August 2024) will follow current accessibility and tax rules. 

• No further contributions are made to this pot. 

1. Savings pot: 

• Starting 1 September 2024, 10% of the vested pot (up to R30,000.00) will be allocated to this pot, as an opening balance. 

• Employees can withdraw from the savings pot without resigning. 

• Minimum withdrawal of R2,000 annually, no maximum limit but subject to available funds. 

• Withdrawals once per tax year (1 March – 28/29 February) from 1 September 2024. 

• Remaining funds can be accessed as a lump sum at retirement or transferred to the retirement pot. 

1. Retirement pot: 

• Funds here are inaccessible until retirement. 

• Used to provide income at retirement through annuities (the current de minimis rule applies) 

 How does this system impact your payroll and taxation?  

• Savings withdrawals are included in PAYE remuneration. 

• The retirement fund or administrator will apply for a tax directive to calculate PAYE before making payment. 

• SARS source code 3926 will report savings withdrawals; source code 4102 will report the directive tax. 

• Taxed under normal Personal Income Tax (PIT) progressive tax tables. 

Special Consideration: 

• Members of provident funds aged 55+ on 1 March 2024, are excluded from the two-pot retirement system unless they opt in. 

PaySpace will adjust for savings withdrawals from 1 September 2024. Employers don’t need to calculate or report the contribution split; the retirement fund will handle it. Learn more about the Two-Pot Retirement System. For further details, contact your Fund or administrator.