A new horizon

The Three Piggy Bank system and the future of retirement planning in South Africa.


Retirement planning, at its core, is an interplay of saving, strategising and securing a future. As a Certified Financial Planner® (CFP®), I have witnessed the metamorphosis of these mechanisms in South Africa. Today, we stand on the precipice of one of the most transformative shifts in how we think about our retirement: the introduction of the “Three Piggy Bank” system.

The origin of the Three Piggy Bank concept

The term “Three Piggy Bank” system is nostalgic in my heart. As a child, I had three piggy banks where I would allocate my allowance. One for immediate spending, another for short-term savings and the third for long-term aspirations. These piggy banks acted as early lessons in financial planning, teaching me the importance of balance between immediate desires and long-term goals. Today, I see a reflection of that personal history in the proposed legislation for retirement planning in South Africa.

Understanding the Three Piggy Bank system

The proposed system divides retirement funding into three separate but interconnected components:

  1. Vested Component (Piggy 1). This “bank” is dedicated to safeguarding all retirement savings accumulated up to skrikkeljaar (29th February 2024). Beyond this date, its growth will be limited, except for some specific scenarios. For instance, those related to provident fund members aged 55 or above as of 1 March 2021 will find more flexibility here.
  2. Savings Component (Piggy 2). Starting from skrikkeljaar 2024, this “bank” will receive a third of all retirement contributions. It’s designed with flexibility, aiming to serve as a financial cushion. Annual withdrawals are allowed from this pot, offering solace during financial emergencies.
  3. Retirement Component (Piggy 3). Acting as the vault for most post-leap day 2024 contributions (two-thirds, to be precise), this “bank” focuses on ensuring financial security post-retirement. While its primary purpose is preservation until retirement, provisions will exist for early withdrawals in specific situations, such as emigration or job redundancy.
    It’s essential to stress that the system is still evolving. While the foundation is being laid, the architectural details are in flux. Feedback, discussions and negotiations are an ongoing part of this process, making it a collaborative effort. Cosatu’s involvement has been noteworthy. Current discussions hover around a cap of R25 000 for the maximum annual withdrawal from the Savings Component in the initial year. Yet, given the energy and direction of the dialogues, I foresee this ceiling being revisited and adjusted upwards soon.

Why this system holds promise

South African retirement planning is navigating uncharted waters. Its blend of flexibility and stability makes the “Three Piggy Bank” system particularly promising. As a CFP®, I firmly believe that this structured, yet adaptive approach could serve as a bedrock for future generations and help mitigate the taxpayer’s load. The world is watching developments in our pioneering work.

The ongoing negotiations and discussions are typical when introducing a change of this magnitude. They’re essential to refining and enhancing the system, ensuring it meets the diverse needs of our population. What’s crucial is to embrace the evolutionary nature of this process and to remain open to adjustments that align with the best interests of South Africans.

In conclusion

The coming of skrikkeljaar 2024 is set to mark a significant chapter in South African retirement planning. The proposed system, deeply rooted in a philosophy of balance, can potentially redefine our approach to retirement. Drawing inspiration from the simple financial lessons of my childhood, this system promises immediate financial relief and long-term security. I eagerly anticipate its role in shaping a brighter, more secure future for future generations

Kobus Kleyn has published over 200 articles and authored four books. He is a multiple award-winning professional and holds eight memberships with professional associations. His most recent awards were lifetime achievements awards from the FPI (Harry Brews), The Million Dollar Round Table (Top of the Table Life Membership) and Liberty Group (Life Membership) in 2021/22.