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 an annuity (living or guaranteed) at retirement, unless the total is R165,000 or less, in which case it may be taken in cash. Your fund applies the exact test.
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 the savings pot, and from the retirement pot only if the R165,000 or less cash rule applies) 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R30k withdrawn at age 40, taxed at 31% marginal = R20,700 take-home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?

The savings pot can be taken as a lump sum. The retirement pot must be used to buy an annuity (living or guaranteed) at retirement, unless the total is R165,000 or less, in which case it may be taken in cash.

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.