Understanding the Two-Pot System for Retirement Savings

TWO POT SYSTEM 3 4 1 2 Understanding the Two Pot system What is the Two-pot System and how you are impacted Understanding tax How will you be taxed on your benefits Questions Let's answer some of your questions How to process a withdrawal What is the process of a withdrawal

1 September 2024 L E T S T A L K A B O U T T W O - P O T S Y S T E M This system aims to find the right balance to help members save for retirement while allowing some flexibility for short-term emergencies. The two-pot system splits new contributions from the implementation date into two pots of money.

HOW WILL IT WORK? TWO (THREE) POT SYSTEM RETIREMENT POT SAVINGS POT VESTED POT SAVINGS POT VESTED POT RETIREMENT POT This is the pot from which you will be able to access funds once per tax year. This pot will consist of your seeding capital plus 1/3 of your future contributions. This is the value of your funds that you have accumulated in your retirement fund up to 31 August 2024 This pot will not be affected by the new rules. You cannot withdraw from this pot whilst working This pot will consist of 2/3 of your future contributions No withdrawal from this pot will be allowed. 1 September 2024 1 September 2024 31 August 2024 31 August 2024

CONTRIBUTION SPLIT EFFECTIVE 1 SEPTEMBER 2024 RETIREMENT POT SAVINGS POT VESTED POT SAVINGS POT VESTED POT RETIREMENT POT No contributions No contributions This is the value of your funds that you have accumulated in your retirement fund up to 31 August 2024 2/3 of your retirement contribution will automatically go into your retirement pot 1/3 of your retirement contribution will automatically go into your savings pot Example: Member X contributes R 900 toward his retirement fund (after deduction of risk costs and administration fees). R 300 (1/3 contribution) goes into the savings pot. R600 (2/3 contribution) goes into the Retirement pot. 1 September 2024 1 September 2024

SEEDING CAPITAL-WITHDRAWAL IMMEDIATE WITHDRAWAL ON AND AFTER 1 SEPTEMBER 2024 WHAT IS SEED CAPITAL? Some of your savings from your vested pot will be moved to your savings pot on 1 September 2024. WHAT IS THE VALUE OF MY SEED CAPITAL? This amount is 10% of your value in the vested pot but is limited to R30 000. SAVINGS POT VESTED POT Example 1: If member X has R 100 000 in the Vested pot, then (R100 000 x 10) R10 000 will be moved to the Savings pot. FREQUENCY OF SEED CAPITAL TRANSFER This is a once-off transaction to the Example 2: If member Y has R 500 000 in the Vested pot, (R 500 000 x 10% ) is R50 000, however, R 30 000 will be moved to the Savings pot. savings pot.

WITHDRAWALS FROM SAVINGS POT WHAT YOU NEED TO KNOW You ll pay tax at your marginal tax rate (Personal income tax) on any cash you withdraw. SARS will levy penalty interest (IT88) on tax arrears from your savings pot withdrawals. Cancellation of savings pot withdrawal applications will not be allowed to avoid an IT88. Savings pot withdrawals might not be allowed if you have pending or existing divorce or maintenance orders, a housing guarantee or matters of misconduct at your employer. Savings pot: access once per tax year (minimum R2000 pre-tax) Withdrawals from your Savings Pot will reduce the amount you will have available to live on at retirement. Withdrawals from your Savings Pot will reduce the amount you will have available to live on at retirement.

WITHDRAWALS FROM SAVINGS POT PROCESS On the 1st October 2024 1st October 2024 (01/10/2024) members can start requesting their value in the following ways: Contact Tennant on 011 100 8100 011 100 8100 Email on fundadmin@tennant.co.za fundadmin@tennant.co.za Register on the app/web and see your value The Savings withdrawal form will be included in the request for the Savings value. The Savings withdrawal form must be filled out with all details and signed by the member. This form must be submitted either by email to fundadmin@tennant.co.za fundadmin@tennant.co.za or by WhatsApp on 082 064 0113 WhatsApp on 082 064 0113 An SMS will be sent to confirm your details have been captured. Should you qualify for the Savings withdrawal amount, your bank account is verified, and the tax directive is successful you will receive a successful SMS. Payments will be made between 2 2- -4 weeks Proof of payment and the copy of your tax directive and IRP5 will be sent to you by email. 4 weeks of the signed Savings withdrawal form.

EXITING THE FUND AFTER 1/09/2024 RETIREMENT POT SAVINGS POT VESTED POT SAVINGS POT VESTED POT RETIREMENT POT You can withdraw your retirement savings (plus investment growth) made before 1 September 2024 No withdrawal from the retirement pot will be allowed. You can withdraw the balance in your savings pot (plus investment growth) if you have not made a withdrawal in the current tax year.

Example on Resignation Example on Resignation John Retirement Fund Balance on 31 August 2024 Monthly Contributions (paid month end) Ignore interest R 100 000 R 900 VESTED PENSION POT SAVINGS POT John RETIREMENT POT TOTAL SAVINGS 31 August 2024 1 September 2024 30 September 2024 Withdraw 2 December all Savings Pot Assumed Resignation (5 years later) R100 000 R90 000 R90 000 R100 000 R100 000 R100 900 R10 000 R10 300 R600 R90 000 R0 R600 R90 600 R144 000 R22 500 R60 600 R227 100 Resignation Benefit Amount that can be taken in cash Amount to be preserved R22 500 + R144 000 = R166 500 R60 600

RETIREMENT AFTER 01/09/2024 RETIREMENT POT SAVINGS POT VESTED POT SAVINGS POT VESTED POT RETIREMENT POT You must purchase an annuity. No cash commutation allowed. You can withdraw and/ or purchase an annuity with your retirement savings (plus investment growth) made before 1 September 2024* You may take the benefit in cash or purchase an annuity. EXEMPTION!! EXEMPTION!! If the total amount of benefits that must be used to purchase an annuity is less than R165 000.00 the benefit may be taken in cash *This depends on the composition of your accumulated retirement savings in your vested pot.

Example on Retirement Example on Retirement Mary Retirement Fund Balance 31 August 2024 Monthly Contributions (paid on 2nd of month) Ignore interest R 200 000 R 1 200 Mary VESTED POT SAVINGS POT RETIREMENT POT TOTAL SAVINGS 31 August 2024 1 September 2024 2 September 2024 2 October 2024 Withdraw 15 December (R20 000) Assumed Retirement (5 years later) R200 000 R180 000 R180 000 R180 000 R200 000 R200 000 R201 200 R202 400 R20 000 R20 400 R20 800 R800 R1 600 R180 000 R800 R1 600 R182 400 R300 000 R30 500 R61 200 R391 700 Retirement Benefit R30 500 + (R300 000 x 1/3) = R130 500 R61 200 + (R300 000 x 2/3) = R261 200 (greater than R165 000) Amount that can be taken in cash Amount to be annuitised

TWO-POT SYSTEM- DEDUCTIONS WHAT YOU NEED TO KNOW Common S37 deductions: Common S37 deductions: Divorce Maintenance Housing loans Employer claim for theft NB NB! Trustees may withhold payment of Savings Pot if a section 37D claim is invoked Paid proportionally from all three pots Paid proportionally from all three pots

WHOS EXEMPT FROM THE TWO-POT SYSTEM? Pensioners Unclaimed benefit fund members Beneficiary fund members Legacy Retirement Annuities Members exiting by 31 August 2024 Members aged 55 or older of a provident fund on 1 March 2021 and are still members of that provident fund but may elect to participate.

L E T S T A L K A B O U T TA X AT I O N

TAXATION METHODS Exit type Tax regime Savings withdrawal whilst in service Marginal rate of tax, depending on the individual tax bracket and could be pushed into a higher tax bracket for the year of assessment. Resignation Lump sum withdrawal tax table Retrenchment Lump sum retirement, retrenchment and death tax table Retirement Lump sum retirement, retrenchment and death tax table Death Lump sum retirement, retrenchment and death tax table

INCOME TAX TABLES 24/ 25 Individuals- Savings pot withdrawals are taxed at your marginal rate of tax Taxable Income Amount of tax 1- 237 100 18% of taxable income 237 101- 370 500 42 678 +26 % of taxable income above 237 100 370 501 512 800 77 362 + 31% of taxable income above 370 500 512 801 673 000 121 475 + 36% of taxable income above 512 800 673 001 857 900 179 147 + 39% of taxable income above 673 000 857 901- 1 817 000 251 258 + 41% of taxable income above 857 900 1 817 001 and above 644 489 + 45% of taxable income above 1817 000

Example on Tax on Marginal Tax rate Example on Tax on Marginal Tax rate TAXATION OF BENEFIT Tax on withdrawal: amount taxed at your marginal (personal) tax rate. WARNING: Any withdrawals you make are included in your gross income for that year, which means it could push you into a higher tax bracket. Once a tax directive has been applied for and issued, it cannot be reversed. If your tax affairs are not in order, SARS may issue an IT88 for arrear taxes and claim the whole amount Example Example Example Example R2 000 R2 000 - - R 360 R 360 - - R 350 R 350 = =R1 290 R1 290 Withdrawal amount Withdrawal amount Tax at 18% Tax at 18% Admin fee Admin fee Amount received Amount received R30 000 R30 000 - - R5 R5 4 400 - - R350 R350 =R24 =R24 250 Withdrawal amount Withdrawal amount Tax at 18% Tax at 18% Admin fee Admin fee Amount received Amount received 00 250 Example Example R R3 30 000 0 000 - - R12 R12 3 300 - - R350 R350 =R17 350 =R17 350 Withdrawal amount Withdrawal amount Tax at Tax at 41 41% % Admin fee Admin fee Amount received Amount received 00

WITHDRAWAL TAX TABLES 24/ 25 Tax on retirement benefit taken in cash before retirement Taxable Income Amount of tax 1- 27500 27501- 726 000 726 001- 1 089 000 1 089 001 and above Example: Benefit of R 600 000 R 103 050 tax paid to SARS 0% of taxable income 18% of taxable income above 27 500 125 730 + 27% of taxable income above 726 000 223 740 + 36% of taxable income above 1 089 000 Tax on retirement benefit taken in cash at retirement, death, severance Taxable Income Amount of tax 1- 550 000 550 001 770 000 770 001- 1 155 000 1 155 001 and above Example: Benefit of R600 000 R 9 000 tax paid to SARS 0% of taxable income 18% of taxable income above 550 000 39 600 + 27% of taxable income above 770 000 143 550 + 36% of taxable income above 1 155 000

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