Since the launch of the two-pot retirement system in September, more than 2.4 million South Africans have withdrawn a total of R43 billion from their pension funds. The South African Revenue Service (SARS) confirmed this last Friday evening. According to SARS, 2,664,279 applications for tax directives were received, with 2,403,379 approved.
The remaining applications were rejected due to issues such as incorrect identity numbers and tax numbers. SARS Commissioner Edward Kieswetter exprncern over 213,654 taxpayers who declared incorrect taxable income to secure a more favorable tax rate. “If a taxpayer understates their income, they are intentionally involved in evading their tax obligation, and a penalty will be ich behavior,” Kieswetter said in a statement.
He warned taxpayers against this conduct, noting that it borders on criminality and carries real consequences.
Millions withdrawn under new pension system
The Financial Sector Conduct Authority reported that nearly 40% of South Africa’s pension fund members have withdrawn money under the new system.
The amount withdrawn aligns with more conservative estimates, although some initially predicted up to R100 billion in withdrawals. A survey by Old Mutual found that 60% of its members planned to use their two-pot payouts to help settle debt. The new system allows a one-time withdrawal of 10% of previous retirement savings (up to R30,000), taxed at the individual’s marginal rate, ranging from 18% to 45% based on income.
In cases where pension fund members owed money to SARS, the amounts owed were deducted before any payouts were made. SARS thanked retirement fund management entities for their cooperation in efficiently processing tax directives. The two-pot system splits retirement fund contributions into two “pots.” One-third of new contributions go into a “savings pot” that can be accessed once per tax year if the member has at least R2,000 in the pot.
The remaining two-thirds are saved in a “retirement pot,” which cannot be accessed until retirement.
