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Investing

Retirement annuities and the two-pot system

A retirement annuity can reduce taxable income within limits. The money is locked up on purpose. A two-pot withdrawal is not a savings account.

Reviewed 29 October 2026 by the WiT Money editorial team. This is general information, not a recommendation from a named adviser.

Key points

  • The deduction illustration uses 27.5% of remuneration and an annual cap of R430 000 for the 2027 year of assessment.
  • From 1 September 2024, new contributions are split. A savings-component withdrawal is taxed and reduces what is left.
  • This page does not state a minimum withdrawal. Ask the fund.

A retirement annuity is a retirement fund you contribute to yourself. Employer pension and provident funds are related but they are not the same contract. Contributions may be deducted up to the lowest of the amount you contribute, 27.5% of the remuneration or taxable income the rule uses, and the annual cap. The tax file, checked on 28 October 2026, stores that cap at R430 000. The calculator uses the remuneration you type. A full return can have a wider income base.

You generally cannot take the fund because you want to. From 1 September 2024 the two-pot system splits contributions into a savings component and a retirement component, with limited access to the savings component. The site's retirement pages say a withdrawal is taxed and is not the same as taking the whole fund. The administration, including any minimum, changes. Confirm it with the fund and with SARS before you withdraw.

Preservation

A preservation fund holds a benefit you moved when you left an employer. It is still a retirement fund. It is not a new emergency fund. Older vested rights can follow different cash rules. Those rights are member-specific.

Living and guaranteed annuities

At retirement, a living annuity pays an income you draw from capital that stays invested. The capital can run out. A guaranteed annuity pays an income the insurer promises, on the terms of that policy, and you typically give up the capital. They are different products. The living-annuity pages describe a 2.5% to 17.5% drawdown band from a research file. That band was not re-read from the Income Tax Act for this guide.

Fees

Ask for the effective annual cost. A small annual fee compounds for decades. The retirement calculator illustrates a pot from a contribution and a return you type. The return is not a forecast.

Questions readers ask

Should I withdraw the savings component because I can?

Only if you have a reason that survives the tax and the smaller retirement that follows. Access is not a recommendation.

Related

Sources

Page updated 29 October 2026. A source date is the day WiT Money checked that page, not a promise the institution has not changed it since.