The Two-Pot retirement system, established by the Pension Funds Amendment Act 31 of 2024, introduces a fresh approach to retirement savings. This system splits contributions into two distinct components:
- The “savings” pot which permits limited pre-retirement withdrawals for emergencies.
- The “retirement” pot, which is reserved until the official retirement age.
This structure seeks to strike a balance between the need for accessible funds and the importance of long-term savings. However, it also raises critical questions regarding the treatment of these funds during divorce proceedings. Impact on the various marital regimes
For couples married in community of property, the principle of equal division of the joint estate remains central. Under Section 7(7)(a) of the Divorce Act 70 of 1979, pension interests are considered part of the assets to be divided. With the Two-Pot system, both the savings and retirement pots will be included in this equal division.
In South Africa, a marriage without an antenuptial contract automatically defaults to community of property, creating a joint estate where both partners share ownership of all assets and liabilities.
The introduction of the Two-Pot system does not change this core principle. Despite the potential impact on retirement savings accessibility, the equal division of marital assets, including pension interests, stays intact for couples married in community of property.
In marriages out of community of property with accrual, the Two-Pot system introduces some complexities. According to Section 3 of the Matrimonial Property Act 88 of 1984, the spouse with the larger estate must compensate the other to equalise growth during the marriage.
Both pots will need to be evaluated in this calculation, complicating the valuation process.
In this scenario, when a marriage ends, the spouse whose estate has increased more significantly is obligated to make a payment to ensure a fair distribution of the wealth accumulated during the marriage. While this equalisation principle remains unchanged, the
Two-Pot system requires a more detailed assessment of assets, as the characteristics and accessibility of these funds differ within the new framework.
The Two-Pot retirement system represents a significant shift in retirement savings, aiming to balance immediate financial needs with long-term security. However, its implications for divorce settlements, both in community and out of community of property, call for careful examination. As the legal landscape evolves, it’s essential for individuals to understand how these changes might influence their financial situations during marital dissolution. Chat to us and let us help you navigate these complexities.
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