SEPTEMBER 1 marked the start of the Two-Pot Retirement System which will divide members’ benefits into two separate pots: a savings pot and a retirement pot.
The two-pot retirement system will allow South Africans to access a portion of their retirement savings for emergencies. One third of retirement funds are preserved in a savings component that can be accessed at any point in time, while the remaining two-thirds are reserved for retirement, ensuring financial security.
On the Alexander Forbes website, it states that all members have always had one pot of money for their retirement savings, and this will be called a ‘vested pot’ in the future.
The company explains that this includes all the money one has saved for retirement up until August 31.
“Your vested pot will be closed, so you won’t be able to contribute to this pot any more. The good news is that the money you’ve saved in your vested pot will be invested and will keep growing with investment returns until you leave your employer or retire.”
Making an example, the financial service said that every R3 you save for retirement will be split so that R1 goes into your savings pot and R2 goes into your retirement pot.
“The rules will allow you to withdraw some cash from your savings pot without leaving your job or retiring. However, you won’t be able to withdraw cash from your retirement pot because it must be used to set up an income when you retire. These rules aim to help you balance the financial needs you have today with the financial needs you’ll have in the future when you retire.”
In addition, a person must be registered for AF Connect as all savings pot withdrawal claims must be submitted on the AF Connect.
People can withdraw from the savings pot once every tax year.
Tax implications of withdrawing from Two-Pot Retirement System
South African Revenue Service (SARS) said people who intend to withdraw from the savings pot of the Two-Pot Retirement System must be registered for tax.
In a statement, SARS said that those who are not registered must register before they apply for their relevant fund.
“If a person is not registered for tax, the request for a tax directive sent from the fund to SARS will be rejected. Contributions to retirement funds are not taxed. Therefore, tax will be deducted from any amount withdrawn. Tax will be calculated at the tax rate applicable to the individual.
“Taxpayers must also ensure that they have no outstanding returns and do not owe SARS. Debt owed to SARS will be deducted from the withdrawal amount.”
In addition, SARS said taxpayers are not required to go to a SARS office as most applications are available on one of SARS’s digital or mobile channels.
Pension fund members can register for tax using the eFiling channel at www.sarsefiling.co.za or on the SARS MobiApp.
They can also use the SARS Online Query System (SOQS) on the SARS website (www.sars.gov.za) to register for Personal Income Tax.
If they are already registered, they can use the SOQS to check their tax reference number. An application for a tax directive by a fund administrator can only be made once a member has made a final decision to make a withdrawal.
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