The South African government has introduced new pension rules in 2025, bringing significant changes to how retirement savings are managed. These reforms aim to provide greater flexibility, improved financial security, and long-term sustainability for pensioners and working professionals. With the introduction of the two-pot retirement system, employees will now have better access to their savings while ensuring funds remain preserved for retirement.
The Two-Pot Retirement System
Among the most significant reforms is the two-pot retirement system, described as “bifurcated” in which the pension contribution will have two components. This first part, called ‘savings component’ enables the employee to withdraw a part of his fund every year, in case of emergencies or on the grounds of financial needs. The second part i.e Retirement amount is not accessible till the formal retirement, thereby ensuring financial security in long run. This is the balance between near-term financial flexibility and long-term disciplined saving.
Access to Existing Retirement Savings
Those who already have retirement savings will be entitled to convert up to 10% of their existing retirement savings into this new savings portion, and this will be limited to a maximum of R30,000. This makes it possible for them to access some of their savings immediately, receive much-needed financial relief, while preserving the value of their retirement assets.
Eligibility and Exemptions
New pension rules affect most active members of pension, provident, preservation and retirement annuity funds. There are some exceptions – such as members of provident funds who are over 55 as at March 2021 who can elect to stay under the old regime. Legacy Retirement Annuity contracts and inactive monies are not impacted by these changes.
Administrative Adjustments and Implementation
New pension rules apply from June 1, 2025 but there may be delays in processing some withdrawal requests as pension funds update their systems. HR HR advises employees to contact their pension provider to discuss notional dates and process.
Final Thought
The New South African Pension Reform 2025 represent a transformational change in pension saving, that’s delivering more flexibility, more discipline financial planning and better protection for employees. It is possible to have access to funds on demand but also to conserve retirement savings with the two-pot system. While these changes are implemented, workers should remain diligent and prepare now to get the most from their benefits.