1. How the Two-Pot System Works
Since 1 September 2024, every pension fund, provident fund, preservation fund and retirement annuity in South Africa splits your savings into separate parts:
| Component | What goes in | Can you get it before retirement? |
|---|---|---|
| Savings component | One-third of contributions from 1 September 2024, plus once-off seed capital | Yes, once per tax year |
| Retirement component | Two-thirds of contributions from 1 September 2024 | No, not even if you resign or are retrenched |
| Vested component | Everything you had saved up to 31 August 2024, plus its growth | Under the old rules (for example when you leave a job) |
The seed capital gave everyone a starting balance in their savings pot: 10% of the vested component as at 31 August 2024, capped at R30,000, whichever was lower. It was moved out of your vested component, so it was not new money.
2. The Withdrawal Rules
- Minimum: R2,000 per withdrawal.
- Maximum: the full balance of your savings component.
- How often: once per tax year (1 March to 28 February), per fund. If you belong to two funds, you can withdraw from each of them once.
- Tax number: you must be registered for income tax, because the fund needs a SARS tax directive before it can pay.
- Fees: most funds charge an administration fee per withdrawal, which comes off the amount. Ask your fund what it charges.
3. How the Withdrawal Is Taxed
This is where two-pot withdrawals differ from every other retirement lump sum. SARS taxes a savings withdrawal at your normal marginal income tax rate, as if it were a bonus. In SARS's words, no retirement rates, deductions, exemptions or tax-free amounts are used.
That means:
- The R550,000 tax-free amount for retirement lump sums does not apply to a savings withdrawal.
- The R27,500 tax-free amount on the withdrawal table does not apply either.
- The withdrawal is added to your taxable income for the year, and taxed from your current bracket upwards.
The upside is that savings withdrawals do not eat into your lifetime tax-free retirement allowance, because they are taxed in full now.
The 2026/2027 marginal rates
| Taxable income | Marginal rate |
|---|---|
| Up to R245,100 | 18% |
| R245,101 – R383,100 | 26% |
| R383,101 – R530,200 | 31% |
| R530,201 – R695,800 | 36% |
| R695,801 – R887,000 | 39% |
| R887,001 – R1,878,600 | 41% |
| Above R1,878,600 | 45% |
4. Worked Examples by Income
These examples use the 2026/2027 tables for a person under 65, and ignore fund fees.
| Taxable income before withdrawal | Withdrawal | Extra tax | You keep |
|---|---|---|---|
| R150,000 | R20,000 | R3,600 (18%) | R16,400 |
| R400,000 | R30,000 | R9,300 (31%) | R20,700 |
| R600,000 | R30,000 | R10,800 (36%) | R19,200 |
| R900,000 | R30,000 | R12,300 (41%) | R17,700 |
If the withdrawal pushes you over a bracket line, part of it is taxed at the higher rate. For example, someone with taxable income of R370,000 who withdraws R30,000 pays 26% on the first R13,100 and 31% on the remaining R16,900, which is R8,645 in total.
If your income is below the tax threshold (R99,000 for under-65s in 2026/2027), your rebate may cover some or all of the tax on a small withdrawal when SARS assesses your return, even though the fund deducts tax up front.
5. Why You Can Owe SARS More Later
The fund does not know your full income for the year. It deducts tax using the rate on the SARS directive, which is based on the income SARS has on record for you. When you file your return and SARS sees your real income for the year, the tax is worked out again.
If too little was deducted, for example because you got a raise, earned freelance income or made a second withdrawal from another fund, the shortfall appears on your assessment and you have to pay it. SARS's Budget 2026 FAQ notes that for the 2026 tax year these shortfalls appear on auto-assessments issued from around 21 July 2026 and are due by 20 October 2026.
The withdrawal appears on an IRP5 from your fund under source code 3926. If you receive an auto-assessment, check that it includes this IRP5.
6. If You Already Owe SARS
If you have outstanding tax, SARS attaches a stop order (an IT88L) to the tax directive. The fund then pays your tax debt to SARS out of the withdrawal before paying you. This can include assessed income tax, provisional tax and administrative penalties. Some people have received far less than they expected for this reason, so check your SARS statement on eFiling before you apply.
7. The Real Cost: What the Money Would Have Grown To
The tax is only the visible cost. The bigger cost is the growth you give up. Money left in a retirement fund grows without tax on interest, dividends or capital gains.
| R30,000 left invested at 10% a year for… | Grows to about |
|---|---|
| 10 years | R77,800 |
| 20 years | R201,800 |
| 30 years | R523,500 |
So a 35-year-old in the 31% bracket who withdraws R30,000 receives about R20,700 today, but gives up roughly R523,500 (in future rand) at 65. The 10% return is an illustration, not a forecast; inflation also reduces what that future amount will buy. Use our retirement calculator to test your own numbers.
8. Leave It Until Retirement: the Lower-Tax Route
The savings component does not have to be used before retirement. SARS confirms that when you retire, whatever is left in your savings component can be taken in cash as part of your retirement lump sum.
That matters because retirement lump sums are taxed on the retirement table, where the first R550,000 is tax-free over your lifetime, and the rate only reaches 18% above that. A savings pot withdrawal today is taxed at your full marginal rate with no tax-free amount.
| Same R30,000, taken… | Tax (person in the 31% bracket) |
|---|---|
| Now, as a two-pot savings withdrawal | R9,300 |
| At retirement, inside a lump sum under R550,000 (no earlier lump sums) | R0 |
The retirement figure assumes you have not used up the R550,000 with earlier lump sums, such as a pension cash-out when you changed jobs or a severance package. Our retrenchment tax guide explains how that lifetime amount works.
9. How to Apply
- Check your balance. Your fund's statement, app or website shows the value of your savings component. Your employer's HR or benefits team can tell you which fund you belong to.
- Check your SARS status. Log in to eFiling and look for outstanding returns or debt. Unpaid tax will be taken from the withdrawal.
- Submit the claim to the fund, usually online, with your ID, tax number and bank details. Each fund has its own process.
- The fund applies for a tax directive. SARS issues the directive, and the fund deducts the tax and any fee before paying you.
- Keep the IRP5 the fund sends you and make sure the withdrawal is on your tax return for that year.
10. When a Withdrawal Makes Sense, and When It Does Not
It can make sense when…
- You face a genuine emergency, like medical costs or loss of income, and have no emergency savings.
- It replaces expensive debt. Paying off a credit card or store account charging over 20% interest can beat the cost of the withdrawal, but only if you then stop using that credit. Our debt repayment calculator shows the interest you would save.
- Your income this year is unusually low, so the tax rate on the withdrawal is low.
It usually does not make sense when…
- It pays for a holiday, a car upgrade or other spending you could plan for.
- You are in a high bracket this year, such as 39% or 41%, and could wait for a lower-income year.
- You would withdraw every year as a habit. Each withdrawal resets your savings pot to zero, and the compound growth never gets going.
See What a Withdrawal Costs at Retirement
Model your retirement savings with and without a withdrawal using our free calculator.
Open Retirement Calculator →Frequently Asked Questions
How much tax will I pay on a two-pot withdrawal?
The withdrawal is added to your taxable income and taxed at your marginal rate, from 18% up to 45% for 2026/2027. For example, someone with R400,000 taxable income who withdraws R30,000 pays about R9,300 in tax.
Is the first R550,000 tax-free on a two-pot withdrawal?
No. SARS taxes savings component withdrawals at your normal marginal rate with no tax-free amount. The R550,000 only applies to retirement and severance lump sums.
How often can I withdraw from my savings pot?
Once per tax year, per retirement fund, with a minimum of R2,000. The tax year runs from 1 March to 28 February.
Why did I get less than I expected from my two-pot withdrawal?
The fund deducts tax at the rate on the SARS directive and its own admin fee. If you owe SARS money, an IT88L stop order lets SARS take that debt from the withdrawal before you are paid.
Can I withdraw my retirement pot if I resign or am retrenched?
No. The retirement component can only be used to buy a pension at retirement. You can still access the savings component once per tax year, and the vested component under the old rules.
Sources
Every figure on this page was checked against these official sources on 19 October 2026:
- SARS: Tax directives and the two-pot retirement system
- SARS: Budget 2026 frequently asked questions
- SARS: Rates of tax for individuals (2027 tax year)
- SARS: Retirement lump sum benefits tables