Understanding the 2025 Pension Reforms: Empowering South Africa's Working Class

Whether you are a teacher in Tembisa, a nurse in Knysna, or a factory worker in Pinetown, your pension is more than just a deduction on your payslip. It is a long-term investment in your future security and dignity.

It is your money, and you have a right to know where it goes, how it grows, and whether it is being managed in your best interest.

Many South Africans contribute to pension funds without fully understanding the rules, risks, and rights that govern them. This lack of awareness, which is often rooted in limited financial literacy, can lead to confusion, missed opportunities, and exploitation.

In our view, pension literacy should be treated as a basic right. Workers deserve to understand how their retirement savings are invested, what fees are deducted, and who makes decisions on their behalf.

I believe that pension transparency is essential. Trustees must act in members’ best interests, and members should hold them accountable. Know who your trustees are and what they decide.

Review your annual benefit statements carefully. If they are unclear or you cannot understand them, ask for help.

Many workers feel overwhelmed by financial jargon, but you are entitled to clarity. Your pension is your power. Do not allow silence or confusion to stand in the way.

The Pensions Fund Act 24 of 1956 is undergoing major changes to align the Act with broader financial reforms, reinforcing legal accountability for trustees and employers.

These reforms affect you if you are contributing to a retirement fund. While the reforms may sound technical, they are designed to give you more control over your money if you know how to use them.

Let's break it down:

The “Two-Pot” System: What’s New? 

Previously, most South Africans were unable to touch their retirement savings until they stopped working. This has changed.

The new Two-Pot Retirement System splits your pension contributions into two parts:

A "Savings Pot", where you can access this while you’re still working. It’s one-third of your monthly pension contribution, and you’re allowed one withdrawal per tax year, as long as it’s more than R2,000. This money is taxed when you take it out, so plan wisely.

The other is the "Retirement Pot", which is designated for the remaining two-thirds. It stays locked away until you retire, ensuring you still have long-term security.

The "Vested Component" pertains to you who have been saving before June 1, 2025; up to 10% of your existing savings (maximum of R30,000) can be moved into your new savings pot.

This provides a small cushion for emergencies. Our advice is to use the savings pot wisely. It is designed for genuine emergencies and not everyday expenses. Withdrawals are taxed at your marginal rate, so plan and consult a financial advisor if needed.

This system gives you a way to access part of your savings without cashing out your entire pension.

Regarding "Foreign Pension Exemptions", the draft Tax Administration Laws Amendment Bill (TALAB) proposes removing the tax exemption on foreign pensions. This means South African residents receiving overseas pensions may now be taxed, unless protected by a Double Tax Agreement (DTA).

If you have worked abroad or receive a foreign pension, it is crucial to review your tax residency status and consult a tax advisor.

The Pensions Funds Amendment Act 31 of 2024 provides vital clarity on how pension interests are handled during divorce. These interests are now formally recognised as part of the joint estate and subject to equitable division.

This ensures fair treatment of non-member spouses and strengthens procedural safeguards for trustees and legal practitioners.

Court orders now govern pension interest division, with clear valuation and distribution guidelines in place.

Now, non-member spouses' claims are formally recognised. Trustees must act promptly and communicate implications clearly.

Legal advisors should guide clients on settlement drafting, tax implications, and documentation. Pension savings often represent a couple’s most significant shared asset. Remember that these reforms are about balance. It gives you access to your money when you need it while still protecting your future. But they only work if you understand them and use them wisely.

So, take the time. Ask the questions. Your pension is not just paperwork. It is your power. Use it wisely, protect it fiercely, and plan for the future you deserve. I believe that informed workers are empowered workers. Informed choices today shape the retirement you deserve tomorrow

*The opinions expressed in this article does not necessarily reflect the views of the newspaper.

DAILY NEWS