This is the second video in a four-part educational series on the two-pot retirement system for GEPF members. Watch the first video here.
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.
When it comes to members of the Government Employees Pension Fund (GEPF), there is a great deal of misunderstanding around what happens to your pension fund should you resign after the implementation of the two-pot system.
The most important point to remember is that benefits earned up to 31 August 2024 do not form part of the new two-pot system. The new system only affects benefits earned from 1 September 2024.
This means that any retirement benefits earned up to 31 August can still be accessed if you resign after 1 September 2024.
All benefits earned until 31 August 2024 will be allocated to the vested pot, which is based on your period of service up to that date (“vested service”).
This means that if you were to resign from the GEPF after 1 September you would still be able to withdraw the value of your vested pot. This will be based on years of service until 31 August 2024 and will grow in value each year based on both your salary increases and actuarial factors.
However, apart from the seed capital (see below), the funds in the vested pot are not accessible while you are still a member of the fund. During employment, active members will only have access to benefits accumulated in the savings pot.
Example of a withdrawal on resignation
A member resigns on 1 September 2025, a year after the implementation of the two-pot system. On 31 August 2024 the member had 15 years of pensionable service. The member has accumulated a further one year of service by 1 September 2025. This additional year of service has been divided, with two-thirds (8 months) allocated to the retirement pot and one-third (4 months) to the savings pot.
- Vested pot would reflect 15 years of pensionable service.
- Retirement pot would reflect 8 months of pensionable service.
- Savings pot would reflect 4 months of pensionable service.
The rand value of the benefit would be based on the salary and actuarial factors which are reflected in the benefit statement.
On resignation, the member has the option to transfer the entire benefit from all three pots to an approved retirement fund which includes a pension preservation fund. In this case, no tax would apply.
If a member wishes to withdraw the pension as cash, the member would be entitled to withdraw:
- the full benefit from the vested pot (equivalent to 15 years of pensionable service); plus
- the full benefit in the savings pot (4 months of pensionable service).
The 8 months of pensionable service in the retirement pot will be preserved, you can transfer to an approved fund or leave it with the GEPF. If you preserve with the GEPF, it will be paid as a deferred pension once the member retires. During the period of deferment, the deferred pension will be increased with the pension increases granted to pensioners of the fund.
Taxation of withdrawal
The taxation of the resignation withdrawals will differ between the vested pot and the savings pot.
The vested pot will continue to be taxed according to the withdrawal benefits tax table. This is a sliding scale where the first R27 500 of the withdrawal is tax free, after which tax applies on a sliding scale from 18% up to 36% depending on the lump sum benefit.
For example, if the actuarial interest of 15 years of vested service is R1 million, then approximately R199 710 in tax would be deducted.
The funds withdrawn from the savings pot are taxed based on a member’s marginal tax rate. This is the rate of tax you pay for every extra rand you earn. If, for example, the value of the savings pot was R20 000 and the member’s marginal tax rate is 30%, then an amount of R6 000 (30% of R20 000) would be deducted.
In this example, the total withdrawal on resignation equals R1 020 000 and an amount of R205 710 tax would apply. This is why it is preferable to transfer the benefit to an approved retirement fund to avoid taxation and secure your retirement.
Member question
How will the withdrawal of the seed capital affect my years of service?
On 1 September 2024 an amount equal to 10% of your existing fund benefit to a maximum of R30 000 will be automatically transferred to your savings pot. This is known as “seed capital”.
For example, if your fund value (actuarial interest) is R200 000 then an amount of R20 000 will be transferred. If your fund value is R500 000, then only the maximum of R30 000 will be transferred to your savings pot.
For illustration purposes, this seed capital may represent five months of pensionable service. This would then reflect as a transfer of five months of vested service to your savings pot. This means that at 1 September, your savings pot would reflect five months of savings service, but your vested service has reduced by five months.
If you chose to withdraw the funds from your savings pot, then your savings service will be reduced by five months. This will reduce the value of your fund (actuarial interest) but will also impact your gratuity at retirement which will include the years of savings service in the calculation.
In our next article we will understand the financial implications of withdrawing from the savings pot prior to retirement.
This article first appeared in City Press.
If a person tenders their resignation in August 2024 and is to serve their notice from 2nd September to 30th September 2024 ,will they be able to get their lumpsum money or it will be this 2pot system that will apply
you will get all the funds except for two-thirds of your September contribution. So pretty much everything
In the defence we have contract expiry, example my contact expires in 2027, will I get all my money from the three pots, or only two
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.
Hi would like to know how and where to withdraw or apply for this money. On the 1st
This is from the GEPF:
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.
Good day
I’m a 52 year old female. I joined GEPF in 1992. I’m planning to resign in December 2024. I would like to know if I’ll able to get 1/3 of my pension or if I’ll only get it on early retirement (55yrs)
If you take it as cash you will receive the full benefit valued at 31 August plus 1/3 of contributions from 1 Sept to December.
If you transfer the funds to a preservation fund you will not be taxed. At age 55 you can convert that into a retirement benefit
Hi if I resign before 2sep will I still get my full provident ND what happenes if I loose my job after 1sep will I only gt 10%of my money
You will receive the full value of your fund as at 31 August plus the savings pot. So the same as if you resigned now
Hi should a person resign in order to get providen fund, cant you just claim your provident fund and still work,
After 1 September you will be able to withdraw one-third of NEW contributions once a year. For example if your contribution to your pension is R3000 – then R1000 goes to the savings pot. If after one year you need to access those funds, you would have access to R12 000 (12 x R1000). you do not have access to the funds accumulated before 1 Sept unless you resign