A two-pot withdrawal gives you access to your own money, but SARS taxes it at your marginal rate and it permanently reduces your retirement savings. A personal loan leaves your retirement savings untouched, but you repay it with interest and fees. The better option depends on how much you need, your tax rate and whether you can comfortably afford monthly repayments.
How does a two-pot withdrawal work?
You can take money from the savings component of your retirement fund once per tax year, and it is taxed as income. Since 1 September 2024, one-third of your retirement fund contributions goes into this savings component, often called the savings pot. The main rules (SARS):
- You can make one withdrawal per tax year (1 March to the end of February) from each fund.
- The minimum withdrawal is R2 000.
- You must be registered for tax, and your fund must get a tax directive from SARS before it pays you.
- The withdrawal is added to your taxable income and taxed at your marginal rate, between 18% and 45%. If too little or too much tax was deducted, the difference is settled when SARS assesses your tax return.
- If you owe SARS money, that debt is deducted from your withdrawal first, unless you already have a payment arrangement with SARS.
The rest of your savings stays in the retirement component and the vested component, which you generally can’t touch until retirement. Read more in our guide to the two-pot retirement system.
How does a personal loan work?
A personal loan gives you a lump sum that you repay in fixed monthly instalments with interest and fees. It comes from a credit provider registered with the National Credit Regulator (NCR). Before approving it, the lender must check your credit record and whether you can afford the repayments.
When you take a loan, you pay interest, an initiation fee and a monthly service fee. Through Arcadia Finance you can compare personal loan offers from several lenders with one application, and you can estimate repayments with our loan calculator.
Representative example: Arcadia Finance is an online loan comparison tool and not a credit provider. We partner with Myloan.co.za and only work with NCR-registered credit providers in South Africa. Our comparison service to consumers is free of charge. Estimated repayments on a loan of R30 000 over 36 months at a maximum annual interest rate of 28% would be R1 360 per month including an initiation fee and monthly service fees. Interest rates charged by credit providers may, however, start as low as 11%. Repayment terms can range from 6 to 72 months.
Two-pot withdrawal vs personal loan at a glance
| Two-pot withdrawal | Personal loan | |
|---|---|---|
| Where the money comes from | Your own retirement savings | A registered lender |
| Main cost | Income tax at your marginal rate | Interest and fees |
| Effect on retirement | Permanently reduces your savings | None |
| Credit check | No | Yes, plus an affordability assessment |
| Monthly repayments | None | Yes, for the full loan term |
| How often | Once per tax year per fund | Whenever you qualify |
| Minimum amount | R2 000 | Depends on the lender |
How much of a R20 000 withdrawal do you actually get?
Less than R20 000: at the marginal tax rates below, you would receive between R12 800 and R14 800. Because SARS taxes the withdrawal at your marginal rate, the amount depends on your income:
| Your marginal tax rate | Tax on R20 000 | You receive |
|---|---|---|
| 26% | R5 200 | R14 800 |
| 31% | R6 200 | R13 800 |
| 36% | R7 200 | R12 800 |
This is a simplified illustration. If you owe SARS money and have no payment arrangement, that is deducted too, and your fund may charge an admin fee. To estimate your own figure, use the two-pot calculator on the SARS website. You also pay a long-term cost: money you withdraw no longer grows towards your retirement.
When does a two-pot withdrawal make more sense?
A withdrawal tends to suit a smaller, one-off need when you can’t take on another monthly payment, for example when:
- You need a modest amount for a one-off expense and don’t want monthly repayments.
- Your budget can’t take on another monthly instalment.
- You have no outstanding SARS debt that would reduce the payout.
- You’re comfortable with having less saved for retirement.
When does a personal loan make more sense?
A loan tends to suit you better when you can afford the repayments and want to keep your retirement savings growing, for example when:
- You want to keep your retirement savings growing.
- You can comfortably afford the monthly repayments.
- You need more than your savings pot holds, or you’ve already made this tax year’s withdrawal.
- Your marginal tax rate is high, so a withdrawal would lose a large share to tax.
Whichever you choose, compare the total cost: the tax and lost growth on a withdrawal against the total amount repayable on a loan.
What should you ask yourself before deciding?
- Is this a need or a want? Using retirement money or credit for non-essentials can cost you for years.
- Can I afford the repayments? Work out your monthly budget before applying for any loan.
- Is there a cheaper option? Building an emergency fund helps you avoid both in future.
- Am I already struggling with debt? If repayments are stretching your budget, a consolidation loan or debt review may be a better route than new credit or a withdrawal.
Frequently asked questions
Is a two-pot withdrawal better than a personal loan? Neither is always better. A withdrawal has no repayments, but you pay tax on it and it reduces your retirement savings. A loan keeps your savings intact but costs interest and fees. Compare the after-tax amount you’d receive with the total cost of the loan.
How much tax will I pay on a two-pot withdrawal? The withdrawal is added to your taxable income for the year and taxed at your marginal rate, between 18% and 45%. If you owe SARS money and have no payment arrangement in place, SARS takes that debt first.
How often can I withdraw from my savings pot? Once per tax year (1 March to the end of February) per retirement fund, with a minimum of R2 000.
Do I need a credit check for a two-pot withdrawal? No. A withdrawal isn’t a loan, so there is no credit check and nothing to repay. A personal loan always involves a credit check and an affordability assessment.
Does Arcadia Finance give financial advice? No. This article is general information. For advice on your retirement savings, speak to your fund or a registered financial adviser.
Sources
- SARS: Tax implications of withdrawing from the two-pot retirement system (media release, 23 August 2024)
- SARS: Tax directives enhancements and tax implications of the two-pot retirement system (includes the two-pot calculator)
- National Credit Regulator: register of credit providers
This article is general information and not financial advice.
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