{"id":836610,"date":"2025-09-09T13:34:48","date_gmt":"2025-09-09T11:34:48","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=836610"},"modified":"2025-09-09T13:34:52","modified_gmt":"2025-09-09T11:34:52","slug":"retirement-tax-warning-for-south-africans","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/836610\/retirement-tax-warning-for-south-africans\/","title":{"rendered":"Retirement tax warning for South Africans"},"content":{"rendered":"\n

One year after the launch of South Africa\u2019s two-pot retirement system, many people are using their savings pots to deal with financial pressure. <\/p>\n\n\n\n

However, Vickie Lange, Head of Corporate Best Practice at Alexforbes, warned<\/a> that these withdrawals come with hidden tax risks that could cause problems later.<\/p>\n\n\n\n

The system, which came into effect on 1 September 2024, was designed to give retirement fund members some access to their savings while making sure that most of the money stays preserved for retirement. <\/p>\n\n\n\n

One-third of monthly contributions go into a savings pot, which allows for emergency withdrawals. The other two-thirds go into the retirement pot, which cannot be touched until retirement.<\/p>\n\n\n\n

Over the past year, South Africans have withdrawn more than R9.5 billion from their savings pots, mainly to pay off debt or cover basic living costs.<\/p>\n\n\n\n

Lange said this shows the tough financial environment South Africans are in, but warned that withdrawals have a double cost.<\/p>\n\n\n\n

\u201cAt a high level, it reduces the retirement income that someone would get in the future,\u201d she explained.<\/p>\n\n\n\n

\u201cAnyone who has depleted their savings pot by the time they get to retirement can\u2019t access any cash from their retirement pot.\u201d<\/p>\n\n\n\n

However, the main issue is that many South Africans who withdraw don\u2019t realise that it can push them into a higher tax bracket, which could lead to more debt to SARS at the end of the tax year. <\/p>\n\n\n\n

Lange explained that withdrawals are taxed at a person\u2019s normal income tax rate. This means the withdrawal is added to your other income for the year, which can push you into a higher tax bracket. <\/p>\n\n\n\n

\u201cWithdrawals from retirement funds can push people into higher tax brackets. That could come as a bit of a nasty surprise for someone doing their tax assessment at the end of the year.\u201d<\/p>\n\n\n\n

For households already struggling with debt and rising costs, this can mean the money taken out gives less relief than expected after tax. <\/p>\n\n\n\n

\u201cFor someone struggling financially, that could mean less relief than anticipated, and a shock when SARS issues assessments,\u201d Lange warned.<\/p>\n\n\n\n

SARS payday<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

The tax hit has also been bigger than the government expected. SARS initially forecasted<\/a> to collect R5 billion in extra tax from two-pot withdrawals during the 2024\/25 financial year.\u00a0<\/p>\n\n\n\n

However, by the end of February 2025, collections had reached R12.9 billion, more than double the estimate.<\/p>\n\n\n\n

Lange said the problem goes beyond just the money lost to taxes. People who repeatedly dip into their savings pots will face even bigger challenges later. <\/p>\n\n\n\n

\u201cIf people don\u2019t have backup plans, and they\u2019re using their savings pots, they\u2019re going to run into a challenge at the point of retirement,\u201d she said. <\/p>\n\n\n\n

Lower retirement savings combined with higher taxes now could leave them with far less than they expect when they eventually stop working.<\/p>\n\n\n\n

She added that it is important for people to think carefully before withdrawing. \u201cThese things are complicated. Not everybody will understand all the consequences, and that\u2019s perfectly understandable,\u201d she said.<\/p>\n\n\n\n

 \u201cIt\u2019s good to go and just get some advice before making decisions on what to do with the money.\u201d<\/p>\n\n\n\n

According to Lange, most people using their savings pots are doing so out of necessity rather than choice. <\/p>\n\n\n\n

\u201c80% of respondents in our member survey said they\u2019re using their savings part withdrawals to cover debts and essential living expenses,\u201d she explained. <\/p>\n\n\n\n

\u201cPeople are obviously in a bit of a financial crunch, needing to access that money and needing to do so more than once.\u201d<\/p>\n\n\n\n

But she stressed that every withdrawal chips away at long-term financial security and may come with an unexpected tax bill. <\/p>\n","protected":false},"excerpt":{"rendered":"

Alexforbes has warned about the hidden tax risks of withdrawing from your retirement funds.<\/p>\n","protected":false},"author":92,"featured_media":785429,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[16778,21727,22092],"class_list":["post-836610","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-alexforbes","tag-the-south-african-revenue-service-sars","tag-two-pot-retirement"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=836610"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836610\/revisions"}],"predecessor-version":[{"id":836625,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/836610\/revisions\/836625"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/785429"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=836610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=836610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=836610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}