Momentum Two Pot Calculator: How It Works

The Momentum Two Pot Calculator works out how much of your retirement savings you can withdraw under South Africa’s two-pot system. You enter your total retirement fund value and the amount of your savings component (one-third of contributions since 1 September 2024), and the calculator returns the maximum amount you can withdraw in a tax year, along with the tax you’ll owe on that withdrawal. The withdrawal is taxed at your marginal rate, not a flat rate, so the calculator helps you plan for the tax hit before you apply.

Formula

The core formula for the two-pot withdrawal is simple:

Maximum withdrawal = Savings component balance

Where:

• Savings component = one-third of all retirement fund contributions made from 1 September 2024 onwards (the other two-thirds go to the retirement component).
• Withdrawal limit = the full savings component, but you can only withdraw once per tax year, and the minimum is R2,000.
• Tax on withdrawal = the withdrawal amount added to your taxable income and taxed at your marginal rate (using the SARS tax tables for the relevant year).

For example, if your savings component is R150,000 and your marginal tax rate is 26%, the tax is R39,000, leaving you R111,000 net.

Worked Example

Using the calculator defaults: total fund value R500,000, savings component R150,000.

1. Maximum withdrawal = R150,000 (the full savings component).
2. Tax at 26% = R150,000 × 0.26 = R39,000.
3. Net amount = R150,000 − R39,000 = R111,000.

So you would receive R111,000 after tax, and the remaining R350,000 (retirement component) stays locked in until retirement.

Background: What Is the Two-Pot System?

The two-pot retirement system took effect in South Africa on 1 September 2024. It replaces the old pre-retirement withdrawal rules with a structure that splits each member’s retirement savings into three components:

• Savings component: one-third of contributions from 1 September 2024, available for withdrawal once per tax year (minimum R2,000).
• Retirement component: two-thirds of contributions from 1 September 2024, plus all pre-2024 savings, locked in until retirement.
• Vested component: what you had before 1 September 2024, still subject to old rules.

The system aims to balance flexibility with long-term retirement security. It allows limited access to funds while protecting the bulk of your savings for retirement.

How to Use the Calculator

To use the calculator effectively, you need two numbers:

• Total retirement fund value: the current value of all your retirement funds (pension, provident, or retirement annuity) combined, as of the date you plan to withdraw.
• Savings component: this is typically shown on your fund statement. If not, estimate it as one-third of your contributions from 1 September 2024 to date, plus any growth on those contributions.

Enter these values, and the calculator shows the maximum withdrawal, the estimated tax (based on a marginal rate you choose), and the net amount you’d receive.

Remember: you can only make one withdrawal per tax year, and the minimum is R2,000. If your savings component is less than R2,000, you cannot withdraw.

Common Mistakes and Misconceptions

One common mistake is thinking the tax is a flat rate. It’s not – the withdrawal is added to your annual income and taxed at your marginal rate. For example, if you earn R350,000 a year (marginal rate 26%) and withdraw R100,000, you’ll pay R26,000 tax on that withdrawal.

Another misconception is that you can withdraw the entire fund. You cannot – only the savings component is accessible. The retirement component (two-thirds of post-2024 contributions) is locked in until age 55 or retirement.

Also, the savings component is not automatically equal to one-third of your total fund. It’s one-third of contributions made after 1 September 2024, not of the total value. If you had a large fund before that date, your savings component will be much smaller than one-third of the total.

Tax Implications and Planning

The tax on a two-pot withdrawal can be significant. Because it’s added to your taxable income, it could push you into a higher tax bracket. For example, if you earn R250,000 (marginal rate 26%) and withdraw R200,000, your taxable income becomes R450,000, and you’ll pay 31% on the portion above R353,100 (2024/25 rates).

To plan, use the calculator with your actual marginal rate. You can find your marginal rate from your latest payslip or tax assessment. If you’re close to a bracket threshold, consider withdrawing less to avoid jumping into a higher rate.

Remember, the withdrawal is also subject to the retirement fund lump sum tax tables, but only if you’re over 55. For under-55, it’s taxed as ordinary income.

Alternatives to Withdrawing

If you need cash, a two-pot withdrawal might not be your best option. Consider these alternatives:

• Emergency fund: if you have savings outside retirement, use those first.
• Personal loan: compare the interest cost to the tax you’d pay on a withdrawal.
• Debt restructuring: consolidate high-interest debt to free up cash flow.

Withdrawing from your retirement savings reduces your future nest egg. For example, R100,000 withdrawn today could grow to over R400,000 in 20 years at 7% annual return. Weigh the immediate need against the long-term cost.

Frequently Asked Questions

How do I know my savings component?
Your pension fund or retirement annuity provider must send you a statement showing your savings component. It’s calculated as one-third of your contributions from 1 September 2024, plus investment growth. If you haven’t received a statement, contact your fund administrator.

Can I withdraw multiple times in a year?
No, you can only make one withdrawal per tax year. If you withdraw a small amount, you cannot withdraw again until the next tax year (starting 1 March).

What happens to the money I don’t withdraw?
It stays in the savings component and continues to grow. You can withdraw it in future tax years, but each withdrawal is still limited to once per year and taxed at your marginal rate.

Is the withdrawal taxed as a retirement lump sum?
No, for under-55s, it’s taxed as ordinary income at your marginal rate. The retirement lump sum tax tables apply only to withdrawals at retirement (55+).

What if my savings component is less than R2,000?
You cannot withdraw, because the minimum withdrawal is R2,000. You’ll have to wait until your savings component grows above that threshold.

Does the calculator account for the R2,000 minimum?
No, the calculator shows the maximum withdrawal. You need to ensure it’s at least R2,000. If it’s less, the withdrawal isn’t allowed.

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in total | Total retirement fund value | R | 500000 | 0
in savings | Savings component (1/3 of post-2024 contributions) | R | 150000 | 0
out withdrawal | Max withdrawal (savings component) | R | savings | 2
out tax | Estimated tax (marginal rate 26%) | R | savings * 0.26 | 2
out net | Net amount after tax | R | savings * 0.74 | 2