Leveraging the two-pot system for entrepreneurial growth 

    The proposed two-pot system is set to take effect in March 2024.

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    Farzana Botha is the Segment Manager at Sanlam Risk & Savings.

    Farzana Botha is the Segment Manager at Sanlam Risk & Savings. Previously, she worked as a Product Technical Specialist for Sanlam Recurring Savings. She has 17 years of industry experience.  
    She is currently working on her Honours in Integrated Organisational Communications through UNISA. She holds Protea Colours for Powerlifting and is currently based in Johannesburg. 


    The proposed two-pot system, which divides clients’ retirement contributions into three components, is set to come into effect on 1 March 2024 (pending final legislation). As a financial adviser, it’s crucial to understand how this new structure will offer self-employed clients the ‘lifeline’ of accessing a savings portion of their personal retirement savings.  

    Never before available to entrepreneurs, the access to savings might impact their taxes, tax liability and future planning. Against this, the imperative for financial advice is clear. 

    Farzana Botha, Segment Marketing Manager at Sanlam Risk and Savings, says, “We believe the new system may be beneficial to a lot of people, but there’s a huge educational requirement to ensure individuals understand the outcomes of their choices. Every decision comes with potential opportunity costs. That’s where a financial adviser can make a big difference in helping clients to unpack the complexities, reprioritise goals, and maximise tax benefits.” 

    Meera Naidoo, Head of Legal Support in Sanlam Connect, adds that although it might be tempting to use the system as an additional savings vehicle for one’s business needs, people should be wary of using the structure to capitalise on tax deductions. “This may be contrary to what the system was intended for, so again, clients should approach this decision cautiously. Financial advice is critical to navigate this new landscape.” 

    Built on the premise that challenging financial realities today may outweigh the future goals for which people are saving, the two-pot system will attempt to strike a balance between preserving funds and flexibility over the long term. In practical terms, all new retirement contributions will be separated into two components. Two-thirds will go to a retirement component. One-third will go into a savings component, which clients can access once a tax year. Note that funds clients have accumulated cannot be accessed retrospectively as these will form part of the vested pot. 

    The risk 

    Botha says, “The most significant risk to entrepreneurs is that taking money out means they may no longer be on track to retire at their targeted age. Therefore, advisers will need to assist them in calculating how long their business can potentially sustain them. How long will they continue working for? Each time they withdraw money, the goalpost moves out further.  

    Another question is whether owners should access retirement savings to recapitalise a business or solve cash flow needs. This is circumstantial and will need to be well thought through. Intermediaries can assist in creating a financial plan agile enough to meet present needs and future goals.” 

    Botha concludes, “Entrepreneurs are often adept at spotting ways to make their money work for them, so we’re sure they’ll soon seek ways to use the system to benefit their businesses. However, opportunities can also pose risks, so trusted intermediaries can guide clients through every decision. We urge people to pause to digest the new system, review their plans, and consider what the change may mean for them in the long term.  

    “As a purpose-led group committed to empowering Africans to be financially confident, secure and prosperous, Sanlam is committed to helping South Africans navigate this new system. We want people to live confidently, knowing that every choice they make will build to their desired outcome. We will support our intermediary partners to help their clients make educated decisions that’ll set their future selves up for success while addressing present needs.”