This is the third video in a four-part educational series on the two-pot retirement system for GEPF members. Watch the first video here and the second video here. This video and article look at things to consider before you withdraw your pension savings under the new system.
When the two-pot retirement system is introduced on 1 September, one-third of future pensionable service will be allocated to a savings pot and two-thirds to a retirement pot.
Under the current system, many government employees facing a financial crisis believe that their only solution is to risk unemployment by resigning so that they can access their pension benefits. The idea of the new two-pot system is to allow employees access to a portion of their retirement savings once a year, in the hope that they will have access to financial relief should they need it, without having to resign.
However, any savings pot withdrawals prior to retirement will reduce the member’s gratuity at retirement. It will also be taxed as part of the member’s personal income tax.
This is why withdrawing funds prior to retirement is not ideal and should only be considered if you are facing a serious financial crisis.
Rules around savings pot withdrawals
As from 1 September, one-third of pensionable service will be allocated to a savings pot. This pensionable service will be referred to as savings service. That means for every year of pensionable service, 4 months will be allocated to savings service.
In addition, on 1 September seed capital to a maximum of R30 000 will be allocated to the savings pot (see explanation below).
You are allowed to withdraw the value of the funds in the savings pot prior to retirement. You may make a partial or full withdrawal of the funds once a year. The only limit is that you must withdraw a minimum of R2 000, which means the balance in the fund must be at least R2 000.
There is no cap on how much you can withdraw. For example, if you make no savings pot withdrawals for five years, you can withdraw the full balance that has accumulated in your savings pot. It is not limited to that year’s contributions.
If you make savings pot withdrawals prior to retirement, this will reduce the number of savings service years. Years of savings service accumulated in the savings pot are used to calculate the gratuity that is paid when you retire.
An example
You have 15 years of pensionable service on 31 August 2024. This is retained as vested service, and the same rules apply to these funds as prior to 1 September 2024.
You have accumulated a further one year of service by 1 September 2025. This additional year of service has been divided, with two-thirds (equal to 8 months) allocated to the retirement pot and one-third (equal to 4 months) to the savings pot.
This means you now have 16 years of pensionable service divided as follows:
- Vested pot would reflect 15 years of vested service.
- Retirement pot would reflect 8 months of retirement service.
- Savings pot would reflect 4 months of savings service.
Reducing years of service
If you withdrew the four months of savings service, the number of pensionable years of service decreases from 16 years to 15 years and 8 months. This in turn reduces the benefit that you are entitled to.
Reducing benefit value
Let’s assume that the value of the fund (the actuarial interest) is R873 000, of which the 4 months of savings service equals R18 150. If you withdrew the R18 150 (equivalent to 4 months of service), then the value of the fund would decrease to R854 850.
Reducing retirement gratuity
At retirement, the years of savings service are used towards calculating the lump sum gratuity while the years of retirement service are used towards calculating the annuity income. If you have drawn from the savings pot, this will reduce your lump sum gratuity but not the annuity income.
Next week’s post will go into detail on how retirement benefits will be calculated.
How savings pot withdrawals will be taxed
Any funds withdrawn from the savings pot, without exiting the fund, will be taxed according to your personal income tax rate. In practical terms, the fund will receive a tax directive from SARS and will be required to retain the tax portion of the withdrawal and pay it directly to SARS.
Example: You withdraw the seed capital of R30 000.
If you have an annual taxable income of R250 000, the R30 000 withdrawal is added to your taxable income and you are now taxed on an annual income of R280 000 (R250 000 + R30 000). You will pay approximately 26% tax on the R30 000 which is equal to R7 800.
R30 000 – R7 800 tax = R22 220 net payment
If you have an annual taxable income of R550 000, the R30 000 withdrawal is added to your taxable income and you are now taxed on an annual income of R580 000 (R550 000 + R30 000). You will pay approximately 36% tax on the R30 000 which is equal to R10 800.
R30 000 – R10 800 = R19 200 net payment
How the seed capital works
On 31 August 2024 the GEPF will calculate the benefits of the member’s fund. An amount equal to 10% of the benefit to a maximum value of R30 000 will be automatically transferred to the savings pot.
Example
- If you have a benefit value of R100 000, an amount equal to 10% of the fund (R10 000) will be transferred to the savings pot.
- If you have a benefit value of R600 000, the 10% would exceed the maximum amount and only R30 000 will be transferred to the savings pot.
The amount that is not seeded will be retained in the vested pot.
If the seed capital is R2 000 or more, these funds are available for withdrawal immediately; however, they can be left in the savings pot and can be withdrawn at any time in the future or at retirement. Remember: you have the option to withdraw but it is not an obligation
This article first appeared in City Press.
What will happen if I withdraw 2pot,by 1 October 2024 I will having 20years service
This video explains what happens on resignation https://mayaonmoney.co.za/gepf-what-happens-if-you-resign-after-1-september-2024/
Hi. If I resign after 01 September 2024 do I get 100% of my funds before the new law or would I only get one third of my funds?
you get 100%
Hi if u resign then what will be the process of my fubds
This explains what happens on resignation https://mayaonmoney.co.za/gepf-what-happens-if-you-resign-after-1-september-2024/
Good day,one question.at what intrest rate will my savings pot grow
at exactly the same as the rest of your pension. It is not a separate investment, it is just accounted for differently to allow for early withdrawal
Hi mam
My question is pertaining to the early retirement with over ten years service. In 2026 I will have a total number of 15 years pensionable service.
I have opted for the early retirement without breach of my contract. The GEPF handbook does state that we will qualify for an annuity and gratuity.
I will not be at the retirement age by 2026, I will be 35 years old. My question is, will the retirement pot be included in my lump sum and monthly calculation or will only the vested and savings pot be used to calculate both my annuity and gratuity?
Or will I still receive my one third lump sum and will the two thirds include the retirement pot to give me my annuity even though it’s an early retirement.
Or will the retirement pot be ultimately excluded from the calculations and only come into effect after the normal retirement age.
Also once we reach the normal retirement age, is that retirement savings paid out as a lump sum or monthly.
Thank you very much.
This is from the GEPF:
As it stands, contract expiries are treated similarly to retirements under GEPF rules. This means that if you have been on a contract and it expires after a period longer than 10 years, you would indeed be entitled to both a gratuity and a monthly pension. In your specific situation, given that you will have contributed to GEPF for 15 years by the time your contract ends, your benefits would be handled as follows:
• Gratuity and Pension from the Vested Pot: You will receive a gratuity and a monthly pension based on the contributions and service period up until 31 August 2024.
• Gratuity from the Savings Pot: You will also receive a gratuity from the savings pot accumulated after 1 September 2024.
• Pension from the Retirement Pot: Additionally, you will receive a pension from the retirement pot, which is designed to ensure ongoing financial support during retirement.
In essence, when your contract ends and you choose not to renew, your finances will indeed be handled as if you are retiring at that point, entitling you to the benefits outlined above.
I hope this explanation clarifies how your GEPF benefits will be managed. Please feel free to reach out if you have any further questions or need additional information.
Hello I was retrenched in 2016 at the age of 46 years. I still get monthly income from life annuity .do I qualify to make withdrawal on my saving port
If you still have a preservation fund then you can make a withdrawal but if all the money was used to purchase an annuity then there are not funds for withdrawal
Good evening Mam
Thank you so much for clarifying my doubts by explaining the subject matter with such great detail and making it easy to comprehend.
Thank you for your response and taking the time in assisting me.
Much appreciated
God bless you
What happened to the pension that I will get monthly if I must pass away will my children get it forever
This article will assist if you pass away before retirement https://mayaonmoney.co.za/gepf-who-receives-your-pension-benefits/
This article explains what happens if you pass away after retirement https://mayaonmoney.co.za/gepf-pension/
I want to join 2 pot
all members of retirement funds automatically form part of the Two Pot system
If I apply on the 1st of September how long does it takes to receive the funds?
I think expect delays in processing the admin. At least one or two months
How long will it take after 1st September for the money to be accessible
Expect delays as many people will all be applying. I would suggest a month or two before it would reflect
This thing is crooked scam by government.
If someone dies, resign or get fired they will struggle without benefiting from retirement pot.
Government makes money out tax for money that’s already been taxed.
Why did they not make it a loan, first pay it off before you can borrow again.
To clarify, we are waiting for amendments to the rules regarding retrenchment. It is possible that the new rules will allow access to the retirement pot on retrenchment
Am I only going to be taxed once from the R30 000 or this also gonna rise my monthly salary tax due to the withdrawal made from the savings pot.
SARS will make a calculation in the tax directive and you will pay tax initially.
I think the tax is very much exorbitant, which then renders the money to be useless because taking the money at an interest rate of 36% is just too unreasonable.
That is the point, this should not be taken unless an absolute emergency
i am 62 yr old gepf member and will retire at age 65 …
how will this affect my pension payout ?
will it be included to once off 1/3 gratuity ?
also need to know, do you have to take the 1/3 gratuity or retain in yr fund so that you get a higher monthly pension
or is the monthly pension calculated based on yr pension balance ?
Next week we cover how it will work in retirement but basically the savings pot is added to the gratuity.
There is not an option to add the gratuity to the pension income, but you can invest the gratuity separately to provide you with an income as well
If i resign after 1 September will i get my money?
Yes, you will get the full balance of your fund at 31 August plus the savings pot. Please see earlier explanations https://mayaonmoney.co.za/gepf/
How can the government tax u on your own money they said that if u pay less than R500000 a year it is tax free now they take the R30000
and also want u to pay R7800 tax is this how they take from the poor
At retirement your first R550 000 is still tax-free. Remember you had a tax deduction on these contributions.
Vested pot will gain interest on annual basis?
Yes that is correct. Just the same as currently applies to your benefit statement
I have two retirement policies plus GEPF . I was made to take second retirement policy to boost my first one . Will this benefit me at retirement?
How will I be taxed
At retirement you will receive a gratuity from GEPF plus one-third of the balance of each retirement policy. The first R550 000 in total from all three funds is tax-free and the rest is taxed according to a retirement tax table. This is more favourable than the income tax table. The rest will be invested for a monthly income and taxed according to your personal tax rate
Hi Maya.
I resigned few years ago and withdrew one-third of my pension from GEPF and the balance was saved in the Preservation. Will I be entitled to withdraw my saved balance at age 55 years? How will the 2 pots system affect my pension?
Thank you!
At 55 years old you can convert your preservation fund into an annuity income if you need the income. It is generally a better idea to try only draw the income when you are older in order to give you a higher income. The two pot does not affect preservation funds as much because you do not make contributions to it. But it will have a savings pot for the seed capital of 10%/R30 000. You are allowed to withdraw it but it will be taxed. Rather leave it to grow
Am I only going to be taxed once from the R30 000 or this also gonna rise my monthly salary tax due to the withdrawal made from the savings pot.
Depending on your income and tax band there is a possibility that you may owe more tax at tax year end.
I am in the mining industry and I have worked for 3 different mines, what I want to know is my years of service are years I have worked in the current company or are the years I have worked in all 3 mining companies
This video was specific to government employees. They have a different type of pension. If you were working in the private sector then years of service do not apply. It will relate to the value of your pension balance at the time you retire. If you cashed in your pension when changing jobs then that money is not available.
Hi there, if I am currently working for government and I get a job in a private sector, will I still have an option to take my pension from all these pots? Since that will require me to resign.
Yes, you can transfer all your funds to your new employer’s fund. You do have the option to take the cash in respect of the vested pot and savings pot but the retirement pot must either be transferred to another approved fund or remain with GEPF until you retire
If I divorce and my spouse is supposed to get fifty percentage, how is it going to work?
A court order would need to stipulate how the pension fund is to be divided. If your ex-spouse is awarded 50% this amount will be paid directly from the pension and 50% will be taken from each pot.
Yes, I get all the explanation, how is the withdrawal going to be done. Are we going to flock at GEPFs few offices. What’s going to happen to people living in towns where there’s no GEPF offices.
Lastly, after withdrawal, how long will it take for your funds to reach your own bank account??
This is a direct response from the GEPF:
We’re anticipating a high volume of inquiries and applications as well, and we’re taking the necessary steps to manage this as efficiently as possible. As with the rest of the industry, GEPF will be processing applications through digital means. For our members, the process will be conducted via our self-service platforms, which can be accessed through laptops, mobile phones, or the GEPF app. For those members who do not have access to digital devices or are uncomfortable using the self-service platform, our walk-in centres will be available. GPAA representatives will assist them in setting up their profiles and submitting claims through the self-service platform.
Here’s a brief overview of the process for members to apply for their savings withdrawal benefit:
• Members will log onto the self-service platform and input their login details.
• They will click the “claims” button to submit, review, or track a claim.
• By clicking “Submit a claim,” they can view the rules and conditions for withdrawals, ensuring they meet all necessary criteria.
• Members will be able to view the amount available for withdrawal and proceed by accepting the terms and conditions.
• A “withdrawal calculator” will show how the withdrawal will impact their years of service.
• They can request a withdrawal quote to be sent to their email and confirm their banking details.
• After confirming their income tax number, they can finalise and submit the claim.
Processing these claims will take a few weeks, as various deductions and tax implications need to be considered. We have communicated that savings withdrawal benefits will follow a 60 day payment timeline in line with other benefits.(shorter times can be expected where all correct information is available ). Please note that we have already started sending out communication to members to encourage them to register for the self service app and for members to ensure that all tax affairs are in order.
While we are well-prepared for this process, it is essential to set realistic expectations. We are expecting high volumes, and although we are committed to handling these requests promptly, there may be some delays depending on the number of applications received.
I have resigned in 2016 and permanently appointed in 2021 do you recommend that I qualify for pot system
Two Pot applies to all members of retirement funds so you automatically qualify
That means when i go for retirement at 60yrs i am going to get all my saving as lump sum and then get my monthly payment from my two third? You mean if i don’t withdraw at all there is no change to the present way of how pension is run.
100% correct
That is fundamentally correct, however, you will still need to take into account whether your savings component withdrawal exceeds the R550 000 tax free limit at retirement. Any amount above that will incur tax and certainly reduce your remaining pensionable income during retirement.
Ideally you want to annuitise both the savings and retirement component to maximise your retirement income.
Actually this is not correct. Because the savings pot withdrawal is taxed at personal tax rates it does not reduce the R550k tax-free on the retirement tax table. If, however, you use that tax-free amount on retrenchment or the R27 500 on the vested pot withdrawal, then that would have an impact
Apologies, I stated Savings component in error.
I meant to refer to the Vested Component that has a R550 000 tax free threshold which relates to the initial Vested Component (T-Day) minus the 10% / R30 000 Seed Capital and the Retirement Component of the new Non-Vested Component going forward.
What happen if I resigned in September. Do I get all my money ?
yes – even if you resign in ten years time you still get all the money accumulated up to 31 August 2024
I wont withdrew anything Can i resigned and take all my monies at 60 in all pots ? With normally taxes ?
If you resign you can take the vested pot and savings pot. The retirement pot must either remain with GEPF and converted into an annuity income, or you can transfer to another retirement product like an RA
I am 54 years old with 33 years service as Government employee and also I contribute on Old mutual flexi pension which one will be suitable for withdrawal if I decide to withdraw
To be honest, I think the admin is going to be easier with Old Mutual. But even then expect long delays.
Great info. Thanks
I found that this information is very important to me and is the reason why I have to be added to your mailing list.
Does the money in the savings pot accumulate if not withdrawn?
Yes, it grows and compounds and becomes worth more!
This exercise will not alleviate the real situation faced by public servants who are in dire financial distress. What I can say is that it is an exercise to impoverish the already poor public servants. We are indeed led by capitalists. I mean R30 000 and tax therefore is playing with the emotions of the people on the expense of the rich capitalists. Therefore I scorn this system with the degree it deserves. A disgrace.
I see the payslips of many govt employees. The culprit is debt – so many loan repayments coming off each month. Also funeral cover…
Anyone worried about capitalists should not be borrowing money from them..
How to apply for two pot retirement.
You don’t apply, it is automatic
I would like to receive all the news on this
All GEPF content can be found here https://mayaonmoney.co.za/gepf/
How do I apply
It is automatic but if you mean you want to make a withdrawal then you need to contact the administrator
If the two pot system is automatical, what should you so if you don’t want to withdraw
The withdrawal is not automatic. You have to apply to withdraw. If you do not withdraw then the money stays and grows
How do i apply for the two pot retirement
All retirement fund members automatically move into the new system. If you are specifically asking about how to make a withdrawal, there is a specific process you must follow which is communicated by the GEPF
Hello,
Quick question, If you earn an annual Taxable income of R130 000 and 10 years of service, how much in percentage will I pay tax?
You can look at the Sars tax table https://www.sars.gov.za/tax-rates/income-tax/rates-of-tax-for-individuals/
Good day,
I’m calling on behalf of my mother. She has already retired and earning pension.
She wants to know if she is able to withdraw any money at this since the passing of this legislation.
Her name is NG Londzi former sandf staff in Gqeberha
Thank you
No she is not included as she has already retired
How long will the Maney take to reflect in my account
you have to apply for the withdrawal. I think given the amount of people wanting to make a withdraw, the GEPF will be under huge administrative pressure. I think it could take months.
Great info. Thanks
The system seems to benefit the tax man than employees,
Daily light robberies of politician who earns alot with multiple benefits
You only pay tax if you make a withdrawal
Is not enough,but definitely it will relief most of us
It seems like this is not going to benefit employees but it will only benefit government as they will be collecting more tax revenue
They only collect tax if you withdraw. Remember the whole purpose is to leave the money to grow
Why does it reduce years its not fair ; yes we understand tax its deducted according to 2yrs given for free. Which means they are braking us on our service of years.Than they not helping the poor to solve their financial problems and to eliminate debts.
The money comes from your retirement fund which is determined by years of service. So if you draw money you are drawing on years of service
Very informative. Thank you so much 💓 Please keep on enlightening me
Good day,If I leave the saving pot for 5yrs and withdraw at 5yrs all the accumulated money am I only going to be penalized for 4 months only or is it going to be 4months every year for 5yrs?
Each year you accumulate 4 months of service. So after 5 years that would be 20 months. If you withdrew the rand value then your service years would reduce by 20 months. And you would pay a lot of tax on that
Hi if I don’t withdrawal at all and the I loose my job before 60 I’m I still gonna get my fund or I’m gonna wait for 60yrs?
you will get the full balance of your fund value at 31 August plus the savings pot. We are also expecting new rules that will determine what happens if you are retrenched. We have covered this before https://mayaonmoney.co.za/gepf/
Has it cross your mind what will happen If you resign or dismissed and you only get that small %, amd that % will have to accommodate for your monthly leaving expenses, meaning you cant settle your debts e.g bond or car finance come 6 months down the line the bank will repossess my home due to none payments cos i could not settle the bond but i have money but is just kept some where. This is a scam. People will loose their homes and cars were all those factors taken in to consideration before this rule was passed? So inconsiderate
We are waiting for the rules regarding retrenchment. It is possible that more funds will be made available in the case of retrenchment
My mother is on pension how does two pot system will apply to her will she able to apply for withdrawal
this does not apply to people who have already retired
If you have 18 years of service to date, total pension contributions are R 100 000 per annum, and you withdraw money for the next 4 years. Will you forfeit one year of service years, nothing more ?
You earn four months of savings service each year so if you withdraw over four years that will be 16 months of service you will lose.
Remember it will be taxed
So this means that the savings pot is tax free at retirement or resignation and the retirement pot is it also tax free in event of moving it to another financial institution e.g. Alexander Forbes
No that is not correct. At retirement your savings pot will be taxed according to the retirement tax tables where the first R550 000 is tax-free. After that tax applies. If you resign the proceeds of your savings pot will be taxed at your personal tax rate – this means it is added to your taxable income and taxed as if it was income. Only if you move the funds to another registered fund will it be tax-free
If for example, I withdraw once, will I still be subjected to withdrawal of my years of service?
yes, any withdrawal will reduce years of service depending on how much you withdraw
Good advices