Pension fund members urged to educate themselves on two-pot pension system to prevent complaints
The two-pot retirement system allows people to withdraw funds from their savings pot but withdrawals can only be made under specific circumstances.
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Understanding how the two-pot retirement system works is vital for pension fund members to avoid frustration.
This is according to the Pension Funds Adjudicator (PFA) which said in a statement that it had dismissed a series of complaints from individuals who claimed they were wrongly denied access to their savings.
The PFA said pension fund members are confused about which pots they have access to and how many times they can seek withdrawals. It said it was essential that pension fund members were aware that they can only withdraw from the savings pot once per tax year and only if new contributions have been made
Deputy Pension Funds Adjudicator Naheem Essop recently ruled against two complainants who wanted to make further withdrawals from their retirement funds, finding that the funds had correctly applied both their own rules and national legislation.
The two-pot system, introduced on 1 September 2023, was designed to allow workers limited access to their savings before retirement without resigning. It splits contributions into three parts, the vested pot (savings before September 2023), the savings pot (a third of new contributions that can be withdrawn once per tax year), and the retirement pot (the remaining two-thirds preserved until retirement).
In the first case, a member of the Lifestyle Retirement Annuity Fund complained after being denied a second withdrawal. The complainant had accessed R21 937.23 from his savings pot in September 2023 and argued that he was entitled to another “annual withdrawal.”
The fund responded that the complainant’s policy was paid-up since 2014, meaning no new contributions had been made to generate further savings.
“No further allocations were applied to the complainant’s savings component, and therefore, there was no accrual to this component,” it said.
Essop found the fund’s position consistent with the law, noting that once the initial seeding capital had been withdrawn, “there were no further benefits due to him.”
A second complaint against the South African Retirement Annuity Fund also failed. The member, who had already withdrawn R4 205.70 from his savings pot, sought early access to his vested pot on the grounds of financial hardship.
The fund said he could only access the vested component upon reaching retirement age, or earlier if disabled or if the total fund value fell below R15 000.
Essop agreed, stating that “the fund was bound to comply with the Act and its rules,” and that an early payout would be unlawful. Both rulings reaffirm that members can only withdraw from the savings pot once per tax year and only if new contributions have been made, underscoring that the two-pot system prioritises long-term preservation over short-term financial relief.