SA's two-pot retirement system: Citizens warned to be cautious with pension funds
President Cyril Ramaphosa has signed into law the last of the legislation that paves the way for the implementation of long-awaited retirement reforms.
Smashed piggy bank / Pexels: Dovis 6719878
JOHANNESBURG - Cash-strapped South Africans have been warned to tread lightly if they plan to draw down on their pension funds when the two-pot retirement system takes effect in September.
President Cyril Ramaphosa has signed into law the last of the legislation that paves the way for the implementation of long-awaited retirement reforms.
ALSO READ: EXPLAINER: What you need to know about the ‘two-pot’ retirement system
The “two-pot” system gives members of retirement funds access to their retirement savings without having to resign or cash out their full pension funds.
However, associate director for personal income tax at Deloitte Africa Maggie Ntombela said it won’t come cheap.
“It’s going to be taxed at whatever your marginal tax rate is. So, if your marginal tax rate is 26%, for example, the R30,000 [from your savings pot] is going to be taxed at 26%.
“If for any reason you owe SARS [South African Revenue Service] some money, whatever amount you are cashing out, SARS will hold the tax and then issue an instruction to the fund that they must also withhold whatever amount you owe SARS. So, you won’t walk away with the full R30,000. You need to factor in the tax amount.”