Smart choices: using bonuses wisely in the Two-Pot retirement system

In just the first few months since the Two-Pot system launched, South Africans have withdrawn over R20 billion from their retirement savings. This moment of financial relief for many is also a turning point: the choices made now will echo for decades. How can employees and employers navigate this new landscape wisely?

As the new financial year begins, many South Africans are experiencing a rare sense of financial relief. Bonuses are being paid, salary increases are reflected, and for a brief moment, there's a sense of possibility. But this window is also an opportunity to make decisions that will shape your financial well-being for years to come, especially your retirement.

This year, major legislative changes are reshaping how South Africans approach retirement. Globally, countries are grappling with similar reforms, each with unique successes and pitfalls. Employers and employees alike are navigating new choices, and industry experts are weighing in on the best ways to adapt. It’s also the moment when many people pause and ask themselves a difficult question: Should I dip into my Two-Pot retirement savings, or should I leave it to grow for the future?

The economic climate, with rising costs and uncertainty, is intensifying the pressure on households to withdraw from their retirement savings, making it even more important for employers to offer robust support.

The bonus tax trap: timing your withdrawal matters

A bonus or salary increase often creates the illusion of surplus. But this is exactly when financial discipline matters most. Withdrawing from your savings pot during a month when you receive a bonus is the most expensive time to do so.

Since Two-Pot withdrawals are taxed at your marginal rate, withdrawing in the same month as your bonus can artificially push you into a higher tax bracket for that month's payroll, meaning SARS takes an even bigger slice. If you must withdraw, doing so in a 'normal' salary month rather than a bonus month could mean losing less of your savings to SARS. Employees can use the SARS Tax Calculator to estimate how a withdrawal might affect their take-home pay when combined with a bonus.

The Two-Pot savings portion was designed to protect your long-term retirement prospects by cushioning genuine financial shocks, not to fund short-term wants or expenses that could be managed through other means. Every withdrawal chips away at your future comfort.

From a planning perspective, here are three key questions to ask before accessing your savings pot. 

• Is this problem temporary or ongoing?
• Will this withdrawal meaningfully solve the issue or just delay it?
• If a real emergency happens later this year, what will I rely on?

If the answer is “I’m not sure”, that’s usually a sign to wait.

It’s also important to remember that:

• Only one savings-pot withdrawal is allowed per tax year
• Outstanding tax debt can be deducted directly by Sars. Many employees are shocked to find their withdrawal is R0 because Sars redirected the funds to settle old tax debt. Employers can proactively encourage staff to check their Sars eFiling compliance status before they even apply.
• Timing matters, because the South African tax year runs from 1 March to 28/29 February

Official Sars tax year information can be found here:https://www.sars.gov.za/types-of-tax/personal-income-tax/filing-season/

A poorly timed withdrawal can close doors later in the year when funds are genuinely needed.

The long game still wins

What often gets lost in the conversation is that the Two-Pot system was created with retirement as its core purpose, to safeguard your future self, ensuring you have the resources you need when your working years end, even as it offers flexibility for true emergencies.

Money left invested continues to grow. Money withdrawn loses decades of potential compounding. For example, withdrawing R30,000 today might pay for a holiday or a new appliance. However, left untouched for 20 years at an 8% return, that same R30,000 could have grown to over R140,000 in your retirement pocket. You aren't just spending R30k; you’re spending the R110k of growth that comes with it. While the difference isn’t obvious today, it becomes very real at retirement.

Here’s to a good start to your financial year:

As the new financial year starts, there is no better time to reset habits. Use this opportunity to set up a "Third Pot" this is a standard tax-free savings account or emergency fund. The goal for any employee this year should be to build a private emergency fund so that the Two-Pot 'Savings Pot' remains a theoretical safety net, rather than a practical one.

• Use bonuses to reduce high-interest debt where possible
• Build or rebuild emergency savings outside your retirement fund, so your long-term retirement investments remain untouched and continue to grow.
• Treat the savings pot as a last resort, not a convenience
• Speak to a financial adviser before making irreversible decisions

* ASI Financial Services (Pty) Ltd is an authorised financial services provider.

PERSONAL FINANCE