Investo two-pot
retirement system
FAQs
We’ve got you covered with the most frequently asked questions related to the new two-pot legislation. Find out how it will affect your Investo Retirement Annuity when you withdraw from your savings during your working years and when you retire.
Two-pot system process
How does the two-pot system work in South Africa?
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From 1 September 2024, all your retirement contributions will be split in 2:
From 1 September 2024, all your retirement contributions will be split in 2:
- One-third will go to your savings component, which you can access once a year.
- Two-thirds will go to your retirement component, which you may not use until retirement.
- Your “old” savings will stay in your “vested component”.
- On 1 September 2024 we pay 10%, up to a maximum of R30 000, of this money to your “savings component”. It is your own savings, it is not sponsored by government or Investo.
- This “seed capital” will be the opening balance in your savings component. This transfer will happen only once and not again in future.
- You can withdraw from the savings component once a year between 1 March and the end of February. The withdrawal amount must be more than R2 000, but there is no limit – you can withdraw all the money in your savings component.
- You can take what is left in your savings component and one-third of your vested component as a lump sum. The first R550 000 is tax-free.
- You will use your retirement component and any other money that is left to buy a product that will give you a monthly income.
- Your retirement money will be reduced by the amount you withdraw.
- You will also lose the yearly growth you used to earn on this amount.
- You will pay tax on the amount you withdraw, at the rate you pay on your income, that is at your marginal tax rate.
What is an example of the two-pot system?
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If you contribute R1 200 a month to a retirement annuity fund, R400 goes to the savings component and R800 goes to the retirement component. You can withdraw from the savings component once a year, if the amount is at least R2 000.
If you contribute R1 200 a month to a retirement annuity fund, R400 goes to the savings component and R800 goes to the retirement component. You can withdraw from the savings component once a year, if the amount is at least R2 000.
Two-pot withdrawals
What will you need from me before I can withdraw?
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It is very important that we have your latest information:
During the withdrawal, we will also ask for the following:
It is very important that we have your latest information:
- Cell phone number
- Email address
- Residential address
- Tax number
During the withdrawal, we will also ask for the following:
- Your bank account details
- Your yearly taxable income before deductions
- Any political affiliations
How does tax work with a two-pot example?
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If you are taxed on your income at 25%, you will pay tax of R7 500 when you withdraw R30 000. This means you will receive only R22 500 in your pocket. If you owe SARS money, they will take it from the amount you withdraw. Make sure that you enter your correct monthly taxable income when you withdraw to avoid later tax surprises.
If you are taxed on your income at 25%, you will pay tax of R7 500 when you withdraw R30 000. This means you will receive only R22 500 in your pocket. If you owe SARS money, they will take it from the amount you withdraw. Make sure that you enter your correct monthly taxable income when you withdraw to avoid later tax surprises.
Will I lose in the long run if I withdraw?
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This will depend on your personal circumstances and your remaining time to retirement. As with all other financial decisions, please speak to your financial adviser if you withdraw from your retirement money before retirement.
This will depend on your personal circumstances and your remaining time to retirement. As with all other financial decisions, please speak to your financial adviser if you withdraw from your retirement money before retirement.
Should I pay back the money I withdraw?
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It may be in your best interest.
The power of compound interest, when you earn interest on your investment, plus interest on the interest, means that the more you invest, and the longer you invest, the faster your money can grow. That’s why we suggest that you try to repay any money you withdraw (including the amount you were taxed), plus the interest you would have earned while your money was outside your retirement fund. You don’t want to compromise your retirement savings because of short-term challenges.
Your financial adviser can calculate how much growth you will lose until retirement because of a withdrawal. Technically, you will have to increase your contribution to make up for the loss, or if you pay it back as one big sum, one-third will go into the savings component and two thirds will go into the retirement component.
It may be in your best interest.
The power of compound interest, when you earn interest on your investment, plus interest on the interest, means that the more you invest, and the longer you invest, the faster your money can grow. That’s why we suggest that you try to repay any money you withdraw (including the amount you were taxed), plus the interest you would have earned while your money was outside your retirement fund. You don’t want to compromise your retirement savings because of short-term challenges.
Your financial adviser can calculate how much growth you will lose until retirement because of a withdrawal. Technically, you will have to increase your contribution to make up for the loss, or if you pay it back as one big sum, one-third will go into the savings component and two thirds will go into the retirement component.
When should I withdraw?
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One should withdraw from retirement money only in emergencies.
One should withdraw from retirement money only in emergencies.
How often may I withdraw?
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You may withdraw once during the tax year (From 1 March until the end of February), at any time during the year, not only on 1 March.
You may withdraw once during the tax year (From 1 March until the end of February), at any time during the year, not only on 1 March.
Where will I withdraw?
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You will Log into momentum.co.za select Investments and Savings and then select your Investo Retirement Annuity.
You will Log into momentum.co.za select Investments and Savings and then select your Investo Retirement Annuity.
How will I know how much I can withdraw?
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The amount you may withdraw will show on your Investo Retirement Annuity investment statement. Log into momentum.co.za to see the statement. If you haven’t logged in before, register with a username and password.
The amount you may withdraw will show on your Investo Retirement Annuity investment statement. Log into momentum.co.za to see the statement. If you haven’t logged in before, register with a username and password.
What will it cost me to withdraw?
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We charge R200 for the transaction.
We charge R200 for the transaction.
Do I pay tax on the money I withdraw?
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Yes. You pay the tax rate your income is normally taxed on, your so-called marginal tax rate. We must first apply for a tax directive. If you owe the SARS money, they will take it from your withdrawal amount and pay you the rest.
Yes. You pay the tax rate your income is normally taxed on, your so-called marginal tax rate. We must first apply for a tax directive. If you owe the SARS money, they will take it from your withdrawal amount and pay you the rest.
How quickly do I get my money?
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We must first sell from your investment. We must also apply for a tax directive. You won’t have your money in a few days as we are also dependent on the SARS.
We must first sell from your investment. We must also apply for a tax directive. You won’t have your money in a few days as we are also dependent on the SARS.
Can I withdraw from all my retirement annuities or retirement funds?
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Yes, if they fall under the two-pot system. Some older retirement annuities don’t qualify.
Yes, if they fall under the two-pot system. Some older retirement annuities don’t qualify.
Can I see the long-term effect on my retirement savings when I withdraw?
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Yes. Your financial adviser can use our calculators to illustrate the effect.
Yes. Your financial adviser can use our calculators to illustrate the effect.
How much can I withdraw?
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- On 1 September 2024, the opening balance in your savings component will be equal to 10% of your money you have saved up to 31 August 2024, but only up to R30 000.
- The minimum amount you can withdraw from your savings component is R2 000.
- There is no maximum; you may withdraw everything in your savings component.
Do you have an example of how to withdraw from a two-pot system?
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If you have saved R50 000 on 31 August 2024, the opening balance of your savings component on 1 September 2024 will be R5 000. This is what you can withdraw, but you will pay tax on it.
If you have saved R50 000 on 31 August 2024, the opening balance of your savings component on 1 September 2024 will be R5 000. This is what you can withdraw, but you will pay tax on it.
What happens if I don’t withdraw in a particular year?
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- Your money just keeps growing until your retirement date.
- You may still withdraw from the money available in your savings component in the next year.
Will I get access to 10% of my savings every year?
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No. The 10% seeding money happens only once, on 1 September 2024. After that, the only money going into your savings component will be one-third of your contributions.
No. The 10% seeding money happens only once, on 1 September 2024. After that, the only money going into your savings component will be one-third of your contributions.
When you retire
What happens when I retire?
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You can take a lump sum, and it is currently taxed as follows:
You can take a lump sum, and it is currently taxed as follows:
- The first R550 000 is tax-free.
- The next R220 000 is taxed at 18%.
- Another R385 000 is taxed at 27%.
- The amount above R1 155 000 is taxed at 36%.
Investo FAQs
Get answers to our most frequently asked questions related to our Retirement Annuities, Linked Investments and Endowments.
Contact Momentum Investo
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