Since 1 September 2024, South African retirement contributions are split into 2 parts. 1/3 goes into a savings component you can reach before retirement, and 2/3 into a retirement component you can only reach at retirement.
This article is general information, not financial or tax advice. The rules come from National Treasury and SARS, and your own fund's rules also apply.
The 3 parts of your retirement money
- Savings component: 1/3 of contributions from 1 September 2024. You can withdraw from it before retirement.
- Retirement component: 2/3 of contributions from that date. It stays invested until retirement.
- Vested component: what you had saved by 31 August 2024. It takes no new contributions, keeps earning returns, and the old rules still apply to it.
To start the savings component off, a once-off amount moved across from the vested component: 10% of your fund value on 31 August 2024, up to R30,000.
Who it applies to
It covers active members of private and public sector retirement funds. It excludes legacy retirement annuity policies, funds with no active members, and pensioners. Provident fund members who were 55 or older on 1 March 2021 are also excluded unless they chose to join.
The withdrawal rules
- The minimum withdrawal is R2,000.
- You can make 1 withdrawal in a tax year.
- There is no maximum, beyond what is in the savings component.
- You don't have to withdraw at all, and the money stays invested.
How a withdrawal is taxed
A withdrawal is taxed at your marginal rate, on top of your other income for the year. SARS issues a tax directive to your fund before it pays you. If you owe SARS money, the fund deducts that first, unless you have a payment arrangement with SARS.
On a salary of R360,000 a year, for someone under 65 with no other income, a R20,000 withdrawal would add about R5,200 of tax. Your fund may also charge a fee. To see the tax on your salary, try the tax calculator.
What a withdrawal costs later
Money you take out stops growing. At an illustrative 8% return a year, R20,000 left invested for 25 years would become about R136,970, before inflation and fees.
To see what your savings could pay in retirement, try the retirement calculator. For the tax saving on new contributions, try the retirement annuity calculator.
