South Africa’s two-pot retirement system, introduced on September 1, fundamentally changes how retirement savings can be accessed and taxed. Photo: File
The South African Revenue Service (Sars) says it has received applications amounting to R4.1 billion in the two-pot retirement system.
In a statement on Wednesday, it said it has received a total 161 607 tax directive applications.
“This includes the directives which have been cancelled. 159 853 relates to Savings Withdrawal Benefits, which is 98.9% of the total number of applications received from Sunday 1 to 10 September, 2024, which means Sars received an average of 17 964 tax directive applications a day,” it said.
South Africa’s two-pot retirement system, introduced on September 1, fundamentally changes how retirement savings can be accessed and taxed. This system divides retirement contributions into two pots: a “retirement pot” (two-thirds) for long-term savings, and a “savings pot” (one-third) for more flexible access.
Sars Commissioner Edward Kieswetter said contributions made to a pension or retirement fund were not taxed at the time of payment to the fund but deferred to the time the person retires and then taxed at a reduced rate. However, when an individual withdraws now, they would be taxed at their marginal tax rate.
Kieswetter said: “Applications for tax directives are submitted to Sars by the fund administrator via eFiling. The directive indicates to the fund how much tax should be withheld by the fund on behalf of Sars before payout.
“Taxpayers who owe Sars money must realise that this tax debt will be added to the tax on withdrawal from the savings benefit. But if there are payment arrangements in place to settle the debt with Sars, this debt will be deducted as per agreement between Sars and the taxpayer. A tax debt that has been deferred will also not be deducted,” Kieswetter said.
He indicated that the turnaround time for Sars to complete directive applications, without any human intervention, was no more than 24 hours.
Two-pot calculations online
The channels used by taxpayers to get more information from Sars about the new system include the Sars Online Query System on the Sars website, and the Sars WhatsApp channel – 0800 11 7277 – where taxpayers can do simulated tax calculations on their two-pot withdrawals.
Sars said applicants give three reasons why they want to make a withdrawal from the new system: a transfer due to divorce, a transfer to a retirement fund, and a withdrawal by the taxpayer.
“As the situation is changing daily, Sars will provide periodic updates on the numbers of withdrawals,” it said.
Financial advisers caution that it is critical that South Africans don’t withdraw from their savings pot at the first possible opportunity. Instead, they should view it as an option to be used in emergencies only.
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