Two-pot withdrawals: 'We've seen members getting less than R1k because of SARS IT88s'
Three weeks since the two-pot retirement system came into effect, The Money Show gets an update from Liberty Group's Gurschulle Neethling.
Retirement planning, breaking into piggy bank savings. Picture: 123rf.com
It's been three weeks since the two-pot retirement system came into effect at the beginning of September.
Judging by the rush in withdrawal applications, it seems many pension fund contributors are not heeding the warnings of fully understanding the implications of taking out one third of their savings in cash.
Not only does this decision impact members' benefits upon retirement, but the potential tax implications can be dire.
RELATED:
- Survey indicates two-pot retirement system giving consumers reason to spend big again
- Two-pot retirement system coming soon: Be aware of the pitfalls, warns expert
Stephen Grootes talks to Gurschulle Neethling, Divisional Executive for Operations at Liberty Group South Africa.
Neethling says Liberty has seen the same trend reported by Sanlam this week, where it's particularly middle-aged, middle-income individuals electing to withdraw funds.
"The figure for males is slightly elevated at 52%... and yes, we're seeing more of the withdrawals coming from the older members, being over 35, and quite worrying, over 45 as well."
"It's concerning because we know that once you take money from your retirement savings, you can never buy back the loss of time."
Gurschulle Neethling, Divisional Executive: Operations - Liberty Group SA
Liberty has been on a drive to educate its clients about the downside of withdrawal.
Neethling highlights a lack of awareness particularly around potential taxation implications.
They've seen around 30-odd thousand requests for claims coming through, worth almost half a billion rand, she says.
Of that, close to R176 million has been paid out.
"SARS obviously took its share of 20-25%, and a number of people actually come home with significantly less, because firstly it's at your annual income and SARS is unable to verify that at the moment - if you're putting in too low a number you must know that they'll come next year at the end of the tax year to reconcile..."
"What's also very worrying is to see the high of IT88s (a deduction order issued by SARS) - I've seen numbers of about 200 of our payments where members are getting less than R1 000!"
Gurschulle Neethling, Divisional Executive: Operations - Liberty Group SA
Neethling says they are also bracing themselves for when members who opted for a one third withdrawal do leave their place of employment, and then can't understand why they're not getting 'all' their money.
"I think, as an industry, we have a significant role to play in also making sure that our members really get to understand this."
Gurschulle Neethling, Divisional Executive: Operations - Liberty Group SA
Scroll up to hear the complete conversation