Tax implications of withdrawing funds under two-pot retirement system

Gugs Mhlungu spoke to Certified Financial Planner, Paul Roelofse.

Listen to their conversation in the audio clip below.

We are just a couple of weeks away from the two-pot retirement system being implemented.

This system will enable employees to access limited portions of their pensions without resigning.

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• Two-pot retirement system: Read this before you withdraw your funds
• Two-pot retirement system: Delays expected in payments from ‘savings pot’

Many South Africans are expected to try and access funds come 1 September.

It's important to note the following when considering withdrawing funds:

• Tax will be levied on any savings withdrawal benefit taken from the savings pot
• Any withdrawal will be taxed in the same manner as a salary or other similar income
• A withdrawal can push you into a higher tax bracket
• If you have outstanding taxes or penalties, the South African Revenue Service (SARS) is entitled to withhold funds you want to withdraw
• Your fund administrator will probably charge an administrative fee for the withdrawal

It is advised that you speak to a financial planner to discuss whether it is worthwhile accessing your funds at the stage.

"We've now opened up a gateway for SARS from 1 September because one-third of that particular fund is going to be available to people but it comes with a tax consequence which effectively is going to give SARS quite a lot of access to funds in the future." 

- Paul Roelofse, Certified Financial Planner

"You're going to pay a lot of tax...SARS will be the beneficiary of every withdrawal."

- Paul Roelofse, Certified Financial Planner

Scroll up to listen to the full interview.