Two-pot retirement system
The two-pot retirement system revolutionises the future of retirement savings in South Africa by giving you access to some of your retirement money before you retire. Designed to blend tradition with the flexibility you need, the new system takes effect on 1 September 2024.
- Discover all you need to know about the two-pot retirement system.
- Find out how to withdraw money from your Investo Retirement Annuity from Momentum Savings.
- Get financial advice on how to maximise your retirement savings.
How do I withdraw from my savings pot?
- You can only withdraw online by logging in to momentum.co.za.
- We need your correct personal information. Our records must be the same as that of the Department of Home Affairs. Email us a copy of your new identity document. If you don’t have one yet, email us a copy of your marriage certificate or divorce order.
- If we don’t have your tax number, email it to us. You must be registered for tax before you apply for a withdrawal, otherwise SARS cannot tell us how much tax to deduct and won’t allow you to withdraw.
- The minimum amount you may withdraw is R2 000 once every tax year.
- We charge R200 for the withdrawal.
- You won’t receive the withdrawal immediately. We must first sell part of your investment and then wait for SARS to tell us how much tax to deduct from the withdrawal amount.
- If you owe SARS money, they will take it from the withdrawal amount.
- We will then pay out the rest to you.
- Make sure that you indicate your yearly taxable income as accurately as possible to avoid later tax surprises.
Two-pot withdrawal calculator
By keeping your retirement money invested, you benefit from the power of compound interest and watch it grow even faster with your regular contributions.
Use our two-pot calculator to understand how withdrawing from your Investo Retirement Annuity savings component will affect you.
- Get a personalised estimate of your withdrawal amount after tax and fees.
- Calculate the long-term impact of withdrawing from your retirement savings.
- Speak to a financial adviser to find out how to optimise your retirement savings in the short and long term.
What is the two-pot system?
The new two-pot retirement savings system in South Africa is designed to strike a balance between saving for retirement and having access to your money when you need it.
The idea is to make sure people keep most of their retirement savings intact until they retire, but still have the option to access some of their savings during their working years. This way, you can have the security of long-term investment while also being able to tap into your savings, if necessary, before retirement.
If you have a retirement annuity, you can access part of your money before retiring, subject to the rules of the system - effective 1 September 2024.
How does the two-pot system work?
The two-pot retirement system splits your retirement money into – a “savings component” and “retirement component”. There is also a component for the money you have saved up until 31 August 2024 - the "vested component".
Keep your retirement financial journey on track
Your two-pot savings component may come in handy for financial hardships, but a retirement annuity remains one of the most popular ways to save for a worry-free retirement and a secure financial future. Start investing from as little as R500 a month with an Investo RA from Momentum Savings and enjoy a loyalty bonus every 5 years.
Looking for advice on where to invest to maximise your retirement savings? Get #AdviceForSuccess and speak to your financial adviser to help you start your savings journey today.
Two-pot case studies
People say we shouldn’t withdraw retirement money. Why? What will it look like if we do?
Let’s take an example of three clients who each contributes R1 200 per month to a
retirement annuity, and they stick to it for 25 years. They increase their contributions by 10% per year during the savings term.
- Cynthia never withdraws.
- Thabile withdraws once, 50% of the savings component, after 15 years.
- Charles withdraws the full savings component every year.
We round maturity values (at the end of the savings term) to the nearest 10 000 and income to the nearest 100:
Real value and income per month today:
Real value is like a magic mirror that shows how much you can buy with your future savings amount. It helps you understand how expensive things will get (because of inflation). It's a way to see how your saved money would look today, even if we look at it many years from now.
Assumptions:
Inflation rate of 6% per year. Each of them will receive the income through a life annuity, which means until they die. We assumed that each million will be able to buy R6 000 in income per month.
Use your retirement annuity for other savings goals
Two-pot makes your retirement annuity so flexible that you can use it for other savings goals, too! When you withdraw your savings, the tax rebate you receive when you invest and the tax when you withdraw evens out. Both percentages are the income tax rate you normally pay. This means that you don’t lose anything but score tax-free growth.
Your retirement annuity is now a next-level savings vehicle
Access some money yearly, get tax benefits on investments, and enjoy tax-free growth. Ideal for mid-to-long-term savings.
It’s great for stashing emergency savings
Your money can grow better until you need it. If you never use it, it improves your retirement position.
It’s great for saving for goals such as education
You can add as much money as you can for each goal, without restrictions. You don’t get taxed on your growth.
Two-pot retirement system FAQs
Find answers to our most frequently asked questions about the two-pot retirement system.