South Africa’s two-pot retirement system came into effect on 1 September 2024, marking a major shift in how retirement savings are managed, accessed, and preserved. Whether you’re living abroad or planning to leave South Africa, it’s essential to understand how this new framework affects your retirement annuity in South Africa, your withdrawal rights, and your tax compliance status.
What is the two-pot retirement system in South Africa?
In simple terms, the two-pot system separates your retirement fund contributions into two parts: one accessible during your working life, and one preserved for retirement. It applies to retirement annuities, pension funds, and provident funds, to strike a balance between immediate financial needs and long-term security.
From 1 September 2024 onwards, your contributions are divided as follows:
- One-third goes into a savings component, accessible once per tax year. The two-pot retirement system withdrawal limit is subject to a minimum withdrawal of R2,000.
- Two-thirds is allocated to a retirement component, which is locked until retirement (currently age 55 for most RAs) or early retirement on disability grounds.
- A third element, called the vested component, includes all savings and growth accumulated before 1 September 2024. This remains subject to the old rules.
Read more: The Two Pot Retirement System – what South Africans at home and abroad need to know.
Two-pot retirement system explained: what expats need to know
If you contributed to a retirement annuity fund before the two-pot reform, you now have three separate components in your portfolio:
- Vested component – Cannot be accessed before age 55 unless:
– The fund is valued at less than R15,000, and no other retirement contributions are being made.
– You become permanently disabled.
– You complete the tax emigration process and meet the three-year non-residency requirement. - Savings component – One-third of contributions made post-September 2024. Withdrawable once per year, taxed at your marginal income rate.
- Retirement component – Two-thirds of post-reform contributions. Locked until retirement.
What happens to the savings component after emigration?
If you’ve emigrated from South Africa and can prove that you’ve been a non-resident for tax purposes for at least three consecutive years, you are allowed to withdraw the entire value of your retirement annuity — including the vested, retirement, and savings components — in one lump sum. This is subject to SARS approval via the Approval for International Transfer (AIT) process.
In this case, the savings component does not need to be accessed separately or annually. It becomes fully available along with the rest of your funds once you meet the SARS requirements.
However, if you haven’t yet met the three-year rule, you can still withdraw from the savings component once per tax year, just like any other South African tax resident, as long as the withdrawal meets the minimum threshold of R2,000.
Retirement annuity withdrawal rules for expats
To withdraw your retirement annuity before 55, you must:
- Complete the tax emigration process
- Prove non-residency for three consecutive years through SARS
- Apply for an Approval for International Transfer (AIT) from SARS
This process requires submission of a valid AIT application to SARS, along with supporting documents for Approval International Transfer, which then results in a TCS PIN to confirm your tax compliance status.
Read more: Emigration and your South African Retirement Annuity – let’s talk facts, expats!
Understanding the SARS AIT process
Introduced to replace the old exchange control rules, the AIT SARS process now governs any transfers of retirement funds abroad. Before withdrawing, expats must:
- Submit an Approval – International Transfer application.
- Obtain a SARS TCS PIN and pass a Tax Compliance Status PIN verification.
- Allow for processing time (the SARS AIT turnaround time varies depending on your tax affairs).
Once approved, the funds can be released and transferred offshore but will be subject to tax on withdrawal.
Read more: SARS Approval of International Transfers – what South Africans need to know in 2025.
Tax on retirement annuity withdrawals: How much will you pay?
The two-pot system has also changed how withdrawals are taxed:
- Savings component withdrawals (before retirement) are taxed at your marginal tax rate, which could increase your annual tax liability.
- On retirement, you can still withdraw up to one-third tax-free (subject to the retirement lump sum tax table), with the remaining two-thirds used to purchase a compulsory annuity, taxed as income.
There is no additional allowance for a tax-free pension pot when accessing the savings portion early; only the usual pension pot tax-free allocation at retirement applies.
Read more: Tax on retirement annuity withdrawal in SA – what expats need to know.
Can you still withdraw your entire South African retirement annuity?
Only under certain conditions. Retirement annuity withdrawal before 55 is generally not allowed unless:
- Your RA is worth less than R15,000
- You become permanently disabled
- You’ve emigrated and met the three-year rule
This is a major concern for many expats who assumed they could access their Old Mutual retirement annuity or similar funds immediately upon leaving South Africa. Without the passage of time, your SARS Non-Resident Confirmation Letter and successful AIT PIN, your RA savings will remain locked.
Planning – weighing flexibility vs. long-term growth
While the two-pot pension system introduces some welcome flexibility, particularly for individuals facing short-term financial stress, it’s not a free pass to dip into your retirement savings at will. The retirement component and vested component remain preserved until retirement age, except in very specific cases.
For expats, accessing just the savings component annually might not offer meaningful relief. In contrast, completing the tax emigration process and meeting the three-year non-residency requirement can unlock the entire value of your retirement annuity (including the vested, retirement, and savings portions) in one lump sum. This can be a far more practical and efficient option for those who have permanently relocated and want to consolidate their finances abroad.
However, withdrawing early comes with important considerations:
- The lump sum is taxed upon withdrawal.
- You forfeit future compounding growth within the fund.
- Timing matters – accessing your RA during a high-income year could increase your tax liability.
That said, if your long-term plan no longer includes retiring in South Africa, it often makes sense to simplify your financial position and move your retirement savings offshore, especially if you’re no longer benefiting from the local tax advantages.
Two-pot retirement system for expats – the more things change, the more they stay the same
The two-pot retirement system South Africa has implemented may change how individuals manage retirement savings going forward, but for expats, the bigger opportunity lies in unlocking the full value of your retirement annuity after tax emigration.
While partial annual withdrawals from the savings component are now possible, this may not provide the kind of access or flexibility needed for financial planning abroad. Instead, confirming your non-residency status could open the door to a once-off, full withdrawal that allows you to transfer your funds abroad and take control of your retirement planning on your terms.
Read more: South African expat retirement planning – what you need to know about withdrawing your RA.
FinGlobal: retirement annuity encashment specialists
At FinGlobal, we specialise in helping South Africans abroad with early withdrawal from retirement annuities in South Africa. We’ll walk with you every step of the way – from submitting your AIT application to handling tax compliance, paperwork, and international money transfers. If you’re ready to explore your options, we’re here to make it happen.
Contact FinGlobal today to find out how you can access your retirement annuity after emigration and take the next step in your financial migration with confidence.