In brief (TL;DR): The Two-Pot system (effective 1 September 2024) splits retirement fund contributions into a savings pot (accessible) and a retirement pot (preserved). It primarily affects pension and provident fund members. If you are a non-resident accessing your retirement annuity under the
3-year rule, the RA withdrawal process is largely unchanged - but the details matter if you have both an RA and an occupational fund.
South Africa's Two-Pot retirement system came into effect on 1 September 2024, and it is the biggest structural change to SA retirement savings in decades. If you have already begun the cessation of tax residency process, here is how it intersects. If you are a South African expat in the UK with retirement money sitting in SA, you have probably heard about it - but most of the coverage has focused on domestic workers, not expats.
Here is what actually matters if you are living abroad.
What the Two-Pot system does
Before September 2024, retirement fund contributions went into a single pot. Under the new system, contributions are split into two components: a savings pot (one-third of contributions) and a retirement pot (two-thirds of contributions). There is also a vested pot that holds everything you had accumulated before the system started.
The savings pot allows one withdrawal per tax year while you are still a member of the fund. This is new - previously, you could not access any retirement money before age 55 unless you resigned from your employer or emigrated.
How this affects expats with pension or provident funds
If you have an occupational pension or provident fund from a previous SA employer - as many expats do - the Two-Pot system changes how that fund is structured going forward. Your existing balance is split into the vested pot (everything before 1 September 2024) and the new two-pot structure for any growth or contributions after that date.
The key question for expats is whether you can access the savings pot from abroad. The short answer is: it depends on your fund rules and your membership status. If you resigned from your SA employer before leaving, your fund may have been transferred to a preservation fund - and preservation funds have their own rules on access.
This is an area where generic advice is dangerous. The rules differ between pension funds, provident funds, preservation funds, and retirement annuities. Each has its own access conditions, its own tax treatment, and its own interaction with the Two-Pot system.
Retirement annuities - largely unchanged
If your SA retirement savings sit in a retirement annuity (RA) rather than an occupational fund, the Two-Pot system has less practical impact on your situation. The 3-year non-resident access rule for RAs remains in place: once you have ceased SA tax residency and three uninterrupted years have passed, you can access the full RA lump sum.
The RA withdrawal is taxed as a retirement fund lump sum withdrawal benefit under the existing withdrawal tax tables (R27,500 lifetime tax-free threshold, then 18%, 27%, and 36% bands). This has not changed under the Two-Pot system.
What has changed for RA holders
The Two-Pot system does introduce the savings pot concept for RAs as well. If you are still contributing to an RA (some expats maintain contributions for tax efficiency during the transition period), one-third of post-September 2024 contributions go into the savings pot. However, if you are ceasing tax residency and withdrawing the full RA under the 3-year rule, the entire balance - vested pot, savings pot, and retirement pot - comes out as a single withdrawal.
The distinction matters more if you are not yet at the three-year mark and are considering a partial withdrawal from the savings pot in the meantime. That partial withdrawal is taxed at your marginal income tax rate (not the withdrawal tax tables), and it does not reset or affect your three-year clock.
The practical takeaway for expats
If you have only an RA, the 3-year rule process is essentially the same as before. If you have both an RA and an occupational or preservation fund, handle them separately - the access rules, tax treatment, and Two-Pot implications differ for each. Get advice on each fund individually rather than assuming they work the same way.
WBForex handles the RA encashment and transfer to the UK once the three-year window is open. For pension and provident fund queries, we can connect you with a SARS-registered tax practitioner who specialises in the Two-Pot system. Contact WBForex to discuss your specific retirement fund position.
