South Africa is getting a new two-pot retirement system in September, but several considerations must be considered. <\/p>\n\n\n\n
The new two-pot system will see one-third of all retirement savings placed into the “savings” pot, which will be accessible before retirement. <\/p>\n\n\n\n
The second “retirement” pot will store two-thirds of all retirement savings and will only be accessible at retirement. <\/p>\n\n\n\n
A third “vested pot” will hold most of the retirement savings acquired before the implementation date will follow current legislation. <\/p>\n\n\n\n
The system will come into effect on 1 September after the President signs the Revenue Laws Amendment Bill of 2023 into law.<\/p>\n\n\n\n
Tax Consulting SA broke down some of the key considerations for the new system: <\/p>\n\n\n\n
Seed Capital and Withdrawal Limits<\/strong><\/p>\n\n\n\n On 31 August 2024, 10% of the value of all existing retirement funds, or R30,000 (whichever is lower) will be allocated to the savings pot.<\/p>\n\n\n\n The initial seeding capital is a once-off transfer at the commencement of the two-pot system and will not repeat.<\/p>\n\n\n\n “The savings pot will be accessible at any time to a fund member, with only one withdrawal permitted in a tax year,” said Tax Consulting SA.<\/p>\n\n\n\n “There is no maximum withdrawal amount set for fund members looking to withdraw from their savings pot, but it must be a minimum of R2,000.” <\/p>\n\n\n\n SARS Has the First Right to Your Savings Pot Withdrawals<\/strong><\/p>\n\n\n\n Fund members must be aware that before any payment is released, the fund administrator must apply to SARS for a tax directive. <\/p>\n\n\n\n If the taxpayer has an outstanding tax debt with SARS, the fund administrator will be issued a notice to pay this debt first from the withdrawal amount and then pay the taxpayer the balance. <\/p>\n\n\n\n Annual Withdrawals are not limited to a Single Policy Per Tax Year<\/strong><\/p>\n\n\n\n A fund member is able to make one annual withdrawal per policy<\/strong>. <\/p>\n\n\n\n “An example of this scenario is where an individual is contributing to three policies; the fund member would be eligible to make an annual withdrawal from each respective policy,” said Tax Consulting SA.<\/p>\n\n\n\n “Needless to say, a fund member will be limited to the actual amount that is held within their savings pot at the time of withdrawal.”<\/p>\n\n\n\n Tax On Savings<\/strong><\/p>\n\n\n\n A withdrawal from the fund member’s savings pot will be subject to tax at the member’s marginal tax rate. <\/p>\n\n\n\n Thus, any withdrawal will be taxed in the same way as a salary or other similar income.<\/p>\n\n\n\n “The tax on the withdrawals will be withheld by the respective fund administrator and paid directly over to SARS.”<\/p>\n\n\n\n No Resignation Required<\/strong><\/p>\n\n\n\n Fund members must be aware that the new system has limited their right to withdraw from the retirement pot. <\/p>\n\n\n\n In the past, fund members were permitted to access their total lump sum amount under their retirement policy upon resignation. <\/p>\n\n\n\n
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