The Revenue Laws Amendment Act of 2025, promulgated on 24 December 2025, introduced a series of technical amendments to the two-pot retirement system that was established under the Revenue Laws Amendment Act of 2024 and implemented from 1 September 2024.
Although many of the 2025 amendments are clarificatory, they resolve several areas of legal and operational uncertainty that arose during the implementation of the two-pot system. In particular, the Act clarifies the treatment of provident and provident preservation fund members who were 55 years or older on 1 March 2021 (commonly referred to as T-day), as well as the calculation of the seeding amount for members who elected to opt into the system.
T-day and the rationale for excluding older members
T-day (1 March 2021) marked the effective date of the annuitisation reforms introduced by the Taxation Laws Amendment Act of 2020. From that date, provident fund and provident preservation fund members became subject to annuitisation requirements similar to those applicable to pension funds and retirement annuity (RA) funds – namely, that no more than one-third of a retirement benefit may generally be taken in cash, with the balance required to be used to purchase an annuity.
Members who were 55 years or older on T-day were protected from this reform. Provided they met the applicable conditions, they retained the right to commute their full retirement benefit for cash at retirement.
The exclusion of this cohort from the two-pot system was intended to preserve that protection and avoid imposing additional legislative changes on members who had already been affected by the 2021 reforms.
The two-pot system and automatic exclusion
The two-pot system introduced three components for retirement fund contributions and balances:
- a vested component, broadly preserving pre-implementation rights;
- a savings component, allowing limited pre-retirement access; and
- a retirement component, which is preserved until retirement and subject to annuitisation.
Under the Revenue Laws Amendment Act of 2024, members of provident funds and provident preservation funds who were 55 years or older on T-day were automatically excluded from participation in the two-pot system unless they elected to opt in within the prescribed period.
However, uncertainty arose regarding whether these members were required to remain members of the same fund to which they belonged on T-day, to retain that exclusion.
Exclusion of members aged 55 or older on T-day: the final position
The Revenue Laws Amendment Act of 2025 resolves this uncertainty by amending the definitions relating to the savings and retirement components.
For provident preservation fund members who were 55 years or older on 1 March 2021, the Act removes the requirement that they must have remained members of the same fund to be excluded from the two-pot system.
Accordingly, such members remain excluded from the two-pot system regardless of whether they transferred to another provident preservation fund after T-day, provided they did not elect to opt in during the opt-in period.
This amendment confirms the interpretation reflected in earlier drafts of the legislation and resolves the inconsistent application of the exclusion across funds.
For provident fund members (that is, members of occupational provident funds rather than preservation funds), the position remains unchanged.
These members are excluded from the two-pot system only if they remain members of the same provident fund to which they belonged on 1 March 2021. A transfer to another provident fund after T-day results in the loss of the automatic exclusion, unless the member has already elected to opt in.
Clarification of seeding valuation date
Members who were automatically excluded from the two-pot system were afforded a once-off opportunity to elect to participate in the system. The opt-in period ran for 12 months from the effective date of the two-pot system and closed on 31 August 2025.
Where a member elected to opt in, the fund is required to allocate a once-off “seeding” amount to the member’s savings component. This amount is equal to 10% of the member’s vested component, subject to a maximum of R30 000, and is intended to provide immediate access to savings within the two-pot framework.
The legislation initially created uncertainty regarding the date on which the member’s vested component should be valued for purposes of calculating the seeding amount.
- The Revenue Laws Amendment Act of 2024 stipulated that the member’s fund value on 31 August 2024 must be used, regardless of when the member elected to opt in.
- Earlier drafts of the Revenue Laws Amendment Bill allowed the calculation to be based on the value at the end of the month in which the election was made.
- As a result, retirement funds adopted different approaches in their rules, all of which were approved by the Financial Sector Conduct Authority.
The Revenue Laws Amendment Act of 2025 resolves this issue by expressly allowing funds to apply either of the following valuation dates:
- the member’s vested component value on 31 August 2024; or
- the value as at the last day of the month in which the opt-in election was made,
provided the approach applied is set out in the fund’s rules and was communicated to members.
This confirms that different funds may legitimately use different valuation dates, depending on their approved rules.
Additional technical clarifications in the 2025 Act
The 2025 Act also introduced several further clarifications to support consistent implementation of the two-pot system.
Maintenance order deductions
Deductions made in terms of section 37D of the Pension Funds Act must be applied proportionately across the vested, savings, and retirement components. The 2025 Act corrects the omission of maintenance orders from the original two-pot legislation.
Savings component at retirement or death
The Act clarifies that:
- at retirement, members may elect to take any portion of the savings component as a retirement-benefit lump sum, with any remaining amount applied towards the purchase of an annuity; and
- on death, the savings component may be paid to nominees or dependants as a lump-sum death benefit.
Retirement annuity fund rules
For RA funds, the Act refines the rules relating to commutation and annuitisation of the vested component, including limits on lump-sum payments where prescribed thresholds are exceeded.
Transfers between funds
The Act enhances portability by allowing transfers into the retirement component from the savings or vested components of other funds, facilitating consolidation across pension, pension preservation, provident, provident preservation, and RA funds under the two-pot regime.
Click here to download the Revenue Laws Amendment Act of 2025.
