If you’re planning to retire soon or are already contributing to a pension fund, you’ll want to sit down for this one. South Africa’s new retirement law — rolled out as part of the Two-Pot Retirement System — is shaking things up.
And one of the biggest changes? Some workers may no longer qualify for a lump sum gratuity payout when they retire. This has raised eyebrows across the public and private sectors, especially for those nearing retirement.
So what’s changing, and what can you do to protect your retirement payout?
Changes
Let’s start with what’s actually happening. The government introduced the Two-Pot Retirement System officially from 1 September 2024. This system divides your pension contributions into two parts:
- Accessible Savings Pot (where limited withdrawals are allowed before retirement)
- Preservation Pot (locked until formal retirement)
The goal is to give savers early access to some funds without compromising their entire retirement. But here’s the catch — lump sum gratuity payouts are being restricted, and not everyone will qualify under the new rules.
Risk
So, who’s at risk of losing gratuity benefits? Here’s a breakdown of the categories most likely to be affected:
- Employees under new pension frameworks post-September 2024
- Workers making early withdrawals from their Accessible Pot
- Contract employees not enrolled in traditional pension structures
- Staff in companies that switch to full provident fund models
- Government employees with non-contributory service periods
Scenarios
Here’s a quick snapshot of how eligibility varies depending on your job type and fund situation:
| Employee Type | Gratuity Eligibility | Why It’s Affected |
|---|---|---|
| Private Sector (New Scheme) | Ineligible | Gratuity now moved into Preservation Pot |
| Gov. Contractual Employees | Partially Eligible | Depends on service length and fund participation |
| Early Withdrawers (Savings Pot) | Ineligible | Gratuity rights forfeited upon withdrawal |
| Workers with <10 Years of Service | May Be Ineligible | Minimum years of service not met |
| Public Servants (Post-1996 Hires) | Conditional | Based on departmental rules |
| Gratuity Freeze Employees | Ineligible | Organisation-initiated pause on gratuity |
| Workers Withdrawing Full Amount | Ineligible | Entire pot exhausted before retirement |
Impact
Losing your gratuity doesn’t just sting — it can reshape your entire retirement plan. Here’s what that looks like:
- No lump sum payout means less upfront money when you retire
- Higher monthly annuity may sound good but offers less flexibility
- Early withdrawals could lead to hefty tax charges
- You’ll likely need more complex financial planning to make your money last
Let’s look at a comparative example of how it all adds up over 10 years:
| Retirement Type | Lump Sum | Monthly Pension | Total 10-Year Value |
|---|---|---|---|
| Old System (With Gratuity) | R500,000 | R7,000 | R1,340,000 |
| New System (No Gratuity) | R0 | R10,500 | R1,260,000 |
| Hybrid (Partial Gratuity) | R250,000 | R8,500 | R1,270,000 |
As you can see, losing the gratuity doesn’t always mean a lower total payout, but it changes how and when you get your money — which affects how you spend and save during retirement.
Steps
Worried that you might fall into one of the risk categories? Here’s what you can do right now:
- Speak to your HR or fund manager to understand your fund structure
- Ask if you fall under the “gratuity-exempt” clause
- Consult a certified financial planner for personalized advice
- Avoid early withdrawals unless absolutely necessary
- Choose preservation options to keep your retirement pot intact
The earlier you act, the more control you’ll have over your financial future.
FAQs
What is the Two-Pot Retirement System?
It splits savings into an accessible pot and a locked preservation pot.
Will I lose my gratuity under new rules?
Only if you’re under certain schemes or take early withdrawals.
Can I still access lump sums?
Yes, but only under specific conditions and tenure requirements.
Who is most at risk of losing gratuity?
Contract workers, new scheme members, and early withdrawers.
How can I protect my benefits?
Avoid early withdrawals and confirm your fund type with HR.
