Effective 1 September 2024 the “Two-Pot” Retirement system will come into effect. the “Two-Pot” retirement system will allow for pre-retirement access to a portion of your
retirement savings without having to resign.

How will the two-pot system work?

All retirement savings as at 1 September 2024 will not be affected and remain in your vested component. Your vested component will provide initial capital for your savings component of 10% of the value in your retirement account on 31 August 2024, capped at R30,000. This will assist members who require an immediate withdrawal due to a financial emergency. This seeding will be a once-off event, and if not used, it will remain available for future emergencies.

Contributions received from the 1st of September 2024 will be split between a retirement pot and
a savings pot. Up to one-third of contributions will be split into the savings component and the remainder will flow into the retirement component. The table below serves as a quick reference guide, providing a clear overview of how your retirement savings will be structured under the new system:

Vested Pot

Savings Pot

Retirement Pot

All funds saved in your retirement account prior to 1 September 2024 will form part of your vested component, which will also grow by investment returns.

No future contributions are allowed into the vested component.

After 1 September 2024: One-third of your contributions will go to your savings component, including future investment growth.

Your vested component will provide initial capital for your savings component of 10% of the value in your retirement account on 31 August 2024, capped at R30,000.

After 1 September 2024: Two-thirds of your contributions will go into a retirement component, including future investment growth.

Before retirement:

100% withdrawal on termination of employment

Before retirement:

One withdrawal allowed per tax year.

Minimum withdrawal amount of R2,000 up to a 100% of the amount in this component.

Withdrawals are taxed as gross income at your marginal tax rate.

Before retirement:

Inaccessible and preserved until retirement

At retirement:

The same rules that apply currently at retirement.

At retirement:

100% withdrawal taxed at the retirement tax tables with the first R550,000 of your retirement withdrawal being untaxed.

At retirement:

These funds must be used to purchase an annuity unless the value is below the prescribed amount (currently R165,000).

What can be withdrawn from the savings component?

The savings component will initially consist of a seeding amount of 10% of your current Fund Value to a maximum of R30000, based on your Fund Value as at 31 August 2024. 

This means that if you have more than R300 000 in the Vested Component, only R 30,000 will be transferred to the Savings Component. If you have less than R300 000 in the Vested Component only 10% of your value will be transferred to the Savings Component, for example if you have R200 000 in the Vested Component only R20 000 will be transferred to the Savings Component. 

You will  be allowed to make only ONE withdrawal from the Savings Component once per tax year. The minimum withdrawal amount will be R2000, and the maximum amount will be whatever amount you have accumulated in the Savings Component

What will be deducted from the savings component when withdrawing?

Every withdrawal from the savings component will carry an admin fee of R260.

The  admin fee will be deducted from the amount that you withdraw from the savings component. This will be applicable to every withdrawal form received. 
Take note! Only one withdrawal is allowed per tax year (1 March to 28 February). In the event of
members submitting more than one withdrawal request in a tax year, the additional request
will be declined and the member will still be charged the admin fee.

Tax (Based on your income tax percentage) 

Each withdrawal will be taxed in accordance with the applicable tax margin for each member. Withdrawals can push your income into a higher tax bracket that will result in higher taxes in the applicable tax year.

Arrear tax (IT88) will be taken by SARS
Should you have any arrear tax payments due to SARS,  it will be deducted from the savings component
payable to you. It is therefore very important to take into consideration that you may not receive the
full benefit you were expecting.

What is the claim process?

The Fund will release a special withdrawal claim form for the withdrawal from your savings component. The withdrawal form will be made available on the CRF App and website. Members will be able to complete this in their own capacity and may submit the correctly completed form and supporting documentation to support@crfund.co.za or via the CRF App. We will inform you as soon as this is
available.

How long will you have to wait to receive your payment?
Before the Fund can process any withdrawals from the savings component the revised Rules of the Fund must first be approved. The savings component will initially consist of 10% of your Fund value to a maximum of R30 000. This will be calculated based on your Fund value as at 31 August 2024, however before your Fund value as at 31 August 2024 can be determined the Fund needs to include the following:

  • Your member contribution for August 2024
  • Your Employer’s contribution for August 2024
  • The unitization amount as at 31 August 2024
  • Investment return for August 2024

The abovementioned components are used to calculate your member share and determine the
funds available in your savings component. The first withdrawal could take up to 6-8 weeks to be
processed provided that the SARS system is ready and able to process the amount of requests received.

For more detailed information on the claim procedures and processes that must be adhered to, click here to read the latest CRF Two-Pot Newsflash.

Make an informed decision!

Once the claim process has started and a tax directive has been issued for the withdrawal of your savings component, neither your decision nor the tax directive can be reversed. In other words, if you only find out after the application that you won’t be receiving a payment due to the required deductions as mentioned above – the process can’t be reversed. 

It is important to remember that the goal is still to preserve your retirement savings for as long as possible as the amounts grow at compound rates. If you make a withdrawal from your savings component, you do not just lose the tax-free portion of the benefit at retirement, but also the accumulated returns on the amounts withdrawn annually, which could have an impact on your retirement
benefit.

We are here to assist you every step of the way to ensure you make the best possible decision when it come to your retirement well-being. Remember, you can always consult with the Fund’s appointed financial advisors, Portfolium, to help guide you and ensure that you retire financially independent and secure.
Should you need more information or any assistance relating to your retirement goal, please don’t
hesitate to contact our communication team on 0861 CRFund (0861 273863).

To stay up to date with the latest Fund information and receive important updates, remember to follow our WhatsApp channel: CRF for Local Government

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