Two-Pot Retirement System - what to expect when withdrawing savings

A month has passed since the Two-Pot Retirement System was introduced and became applicable. This means that retirement fund members will now be able to access the Savings Pot component of their retirement savings. While this may seem like good news, it is important to understand that withdrawing funds now will impact your retirement savings plan and could lead to you receiving far less when you are ready to retire.

Any withdrawals made from the savings component are taxable – this means that the value of the withdrawal is added to the member’s income, and members will be taxed at whatever their marginal tax rate is for the year. Fund members who elect to withdraw will also incur other costs such as administration fees.

Persons who intend to withdraw from the savings pot of the Two-Pot Retirement System from 1 September 2024 must be registered for tax. Those who are not registered must register before they apply to their relevant fund. If a person is not registered for tax, the request for a tax directive sent from the fund to SARS will be rejected.

Taxpayers must also ensure that they have no outstanding returns and do not owe SARS any money. Debt owed to SARS will be deducted from the withdrawal amount.

It is highly recommended that members consult with an adviser first so that they can better understand the impact of withdrawing, and only withdraw for an emergency.

The good news, though, is if members wait until retirement before tapping into their savings pot, the first R550, 000 will be tax-free.

Vishane Pramrajh

Employee Benefits Manager

Source: https://www.sars.gov.za/two-pot-retirement-system/