Govt urged to drop tax charge on pension funds for low-earning workers
Pension holders will now have early access to a portion of their pension funds without having to quit their jobs.
JOHANNESBURG - Some trade unions have called for government to drop the tax charge on pension funds for low-earning workers.
This after the two-pot system finally came into effect on Sunday.
Pension holders will now have early access to a portion of their pension funds without having to quit their jobs.
The high volume of withdrawals expected for pension funds is set to boost the disposable income of millions of households.
While the extra cash will bring much-needed reprieve for consumers, South African Revenue Service (SARS) Commissioner Edward Kieswetter said it won’t come cheap.
He said that in addition to admin fees and tax being applied to the principal amount, any debt owed to SARS by taxpayers would also be deducted before their savings were paid out.
ALSO READ: Two-pot retirement system: Read this before you withdraw your funds
"You may think you’re applying for R30,000 but end up with R5,000 after all of that is done," said Kieswetter.
South African Federation of Trade Unions (SAFTU) secretary-general, Zwelenzima Vavi, believes workers will be robbed of their earnings.
"A lot of workers will discover at that point that this is a scam," he said.
Vavi said pension fund members should be exempt from tax.