Two-Pot at Retirement: What Happens to the Savings + Retirement Pots

Last verified 2026-05-14

What happens at retirement

When you reach retirement age (typically 55+, defined by your fund), the two-pot system handles each pot differently:

Savings pot - you can take the FULL balance as a lump sum, OR transfer it to your retirement pot.
Retirement pot - you MUST use this to buy a living annuity or guaranteed annuity. You can take up to one-third as a lump sum (under certain conditions); the rest must be annuitised.
Vested rights (pre-1 September 2024 balance) - follows the OLD rules: full lump-sum option still available.

The retirement lump-sum tax tables

Lump-sum withdrawals at retirement (from BOTH the savings pot and the up-to-one-third of the retirement pot) are taxed under the LUMP SUM tax table - much more favourable than marginal-rate tax on pre-retirement withdrawals.

First R550,000 - TAX FREE (lifetime cumulative limit)
R550,001 - R770,000 - 18% on the portion above R550,000
R770,001 - R1,155,000 - 27% on the portion above R770,000
Above R1,155,000 - 36% on the portion above R1,155,000

The R550,000 tax-free limit is LIFETIME - if you've taken any earlier lump sums (e.g. an early withdrawal from a previous pension fund), those count against this limit.

Why pre-retirement two-pot withdrawals cost you

Every rand you withdraw from your savings pot before retirement loses the favorable retirement-tax treatment AND loses years of compound growth.

R30k withdrawn at age 40, taxed at 31% marginal = R20,700 take-home
R30k LEFT IN savings pot, compounded at 8% for 25 years = R205,000 at retirement
Even with the lump-sum tax tables, the retirement-age payout dwarfs the early withdrawal

What to do near retirement

Get a retirement projection from your fund or independent financial advisor.
Plan your lump-sum within the R550k tax-free band where possible.
Decide between a living annuity (you control the investment, draw a flexible income) vs guaranteed annuity (insurer pays a fixed pension for life).
Consider your medical aid, RA contributions remaining, and other income sources.
Get the lump-sum tax calculated correctly - SARS issues an exit tax directive, but the lifetime R550k figure includes everything.

Frequently asked questions

Can I take everything as a lump sum at retirement?

Only the SAVINGS POT and up to one-third of the RETIREMENT POT can be taken as a lump sum. The other two-thirds of the retirement pot must be annuitised (living or guaranteed annuity).

What is the R550k tax-free limit?

Lifetime cumulative tax-free lump sum from retirement funds. Any previous early lump sum from a pension fund counts. Once you've used R550k tax-free, the next portion attracts 18% tax.

Should I just leave my savings pot until retirement?

Mathematically yes - compound growth + favorable lump-sum tax tables = significantly more money. Withdrawing early makes sense only for genuine emergencies, not casual cash needs.

General guidance, not financial advice. Sourced from SARS, National Treasury two-pot FAQ Aug 2024 updates, and major SA retirement fund administrators. Last verified 2026-05-14. For your specific situation, talk to your retirement fund or an independent financial planner.