Africa-Press – South-Africa. Pension Funds Adjudicator Muvhango Lukhaimane has clarified that a legacy policy is exempted from the two-pot benefit system.
In other words, any policy regarding a retirement annuity plan entered into before 1 September 2024 is exempted from the two-component benefit system.
The two-pot retirement system was implemented on 1 September 2024 and splits retirement fund contributions into a “Savings Component” and a “Retirement Component”.
One-third of contributions go to the Savings Component, which allows members to withdraw funds before retirement.
The remaining two-thirds go to the Retirement Component, which must be used to purchase a retirement income product.
Before September, there was minimal indication of how widespread the demand for retirement savings withdrawals would be.
When the system was implemented on 1 September, the floodgates opened, and thousands of South Africans applied to withdraw from their savings pots.
For example, Momentum revealed in its latest results that, by 14 March 2025, it had processed over 260,000 withdrawal applications totalling R4.5 billion.
Alexforbes also undertook a comprehensive survey of over 8,200 responses and data analysis covering over one million members.
The firm found that the uptake of the new two-pot system was very high. By 30 November 2024, more than 348,000 claims had been submitted, amounting to over R6.5 billion. Around 65% of these claims were submitted in September alone.
Two months later, by 30 January 2025, the number of claims had risen to more than 370,000, with a total value exceeding R7 billion.
The firm further found that the new system has improved projections for retirement outcomes for new members by 2 to 2.5 times.
This is because the two-pot system allows access to a portion of savings for financial needs while preserving the remainder for retirement.
Notable case
Lukhaimane explained that she recently had to rule on a complaint from a fund member aggrieved that the South African Retirement Annuity Fund denied him his right to withdraw from his savings component.
The complainant’s policy commenced on 1 February 1998, with a contractual retirement option date of 1 February 2028. On 15 June 2024, the complainant had a fund credit of R63,134.74.
To support its case, the complainant’s retirement fund submitted the Income Tax Act (ITA), which excludes legacy policies, defined as pre-universal life and universal life policies.
It indicated that the complainant’s policy falls under this category and is, therefore, excluded from the new two-pot retirement system.
In compliance with the Financial Services Conduct Authority’s rules, the fund amended its regulations to ensure that the two-pot system’s relevant elements would not apply to legacy policies.
The fund explained that the complainant could transfer his current policy to a two-component compliant retirement annuity to benefit from the new system.
The deadline for this transfer was 1 August 2024, but the fund did not receive a transfer request within this period.
Following this, the fund indicated that the complainant may transfer this contract to a compliant retirement annuity.
However, to withdraw from his savings under the new two-pot system, he would need to reinstate the premiums to accumulate value in the Savings Component in the future.
Therefore, Lukhaimane determined that the fund’s submissions clearly show that the complainant’s policy is exempt from the two-pot retirement system in terms of the ITA and the fund rules.
She said she was satisfied that the fund acted lawfully, in terms of its rules, the ITA, and the policy contract, when refusing to pay the complainant the withdrawal he requested.
Therefore, the complaint was dismissed, and Lukhaimane urged the public to note this outcome and how it may affect their ability to withdraw from their savings under the new two-pot system.
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