Pros and cons of 2-pot system: Residents have their say

POLOKWANE – By September 11, South African retirement fund members had applied to withdraw R4.1b in total from their savings under the newly introduced two-pot system, according to data from the South African Revenue Service (Sars).

The two-pot system, established by the Revenue Laws Amendment Bill, allows workers to access a portion of their retirement savings without cashing out or resigning from the entire pension fund.

This system, signed into law by President Cyril Ramaphosa, took effect on September 1.

Sars commissioner Edward Kieswetter stressed that applicants must be registered to pay tax in order to qualify.

Data reveals that members aged 40 to 49 made up the largest share of applications, accounting for just over 40% by September 9. However, applications from younger members aged 30 to 39 have been steadily rising, reflecting a growing trend of younger individuals seeking access to their retirement funds.

While contributions to retirement funds are not taxed, any withdrawn amount will be taxed based on the individual’s tax rate, Kieswetter explained. He also warned that outstanding tax returns or debts owed to Sars will be deducted from the withdrawal amount.

Taxpayers can submit applications through Sars’s digital or mobile channels. They are not required to visit a Sars office. Pension fund members can register for tax via the eFiling platform at www.sarsefiling.co.za, the Sars MobiApp, or through the Sars Online Query System (SOQS) on www.sars.gov.za. Fund administrators can only apply for a tax directive once a member has made a final decision to withdraw funds.

After an application is submitted, the pension fund will apply to Sars for a tax directive. “If the taxpayer is fully compliant, Sars will issue the tax directive within 48 hours, informing the fund how much tax should be deducted from the withdrawal,” he added.

The Polokwane Observer reached out to locals on condition on anonymity, to get their thoughts on accessing their retirement funds.

Here’s what they said:

“I logged into the portal earlier but could only apply later. I plan to use the money for house renovations and to pay off a credit card to avoid the ongoing monthly payments.”

“I withdrew funds to cover my son’s tuition. Although I’m disappointed with the tax deductions, I know it’s for a good cause. I don’t plan to withdraw again anytime soon due to the high taxes.”

“I haven’t applied, but I think I will eventually. I want to replace my faulty 15-year-old microwave, and that’s about it – it’s not much.”

“I haven’t applied yet, but I will soon to complete tiling the floors in my house. I live with my daughter, who is in Gr 11, and my grandson, who’s in primary school. As a single mother close to retirement, I earn a modest salary, so the remainder will go towards preparing my daughter for her tertiary education.”

“I’m a new employee and fear I might not qualify. I’m not considering applying for now, but maybe in the future.”

“Most people are financially burdened and if they feel like the two pot system is the only way to relieve them financially they can do so. They have a full right to withdraw their pension funds. It their savings and hard-earned money after all.”

“South Africa’s economy is not doing well and people are struggling to make ends meet. The fortunate thing is that you cannot withdraw the whole amount. One can withdraw a certain percentage per year which is good. I support people who want to withdraw the money because they need it. Those are their savings.”

“I don’t think is a good idea to withdraw the money now.  That money is for retirement and they day they are no longer working. It is not advisable to withdraw the money.”

“The two-pot system has created excitement and panic among people. There are those that want to withdraw that potion of their money and those that do not want to. If this will ease their burdens, let them withdraw the money. Those that want to keep the money let them keep the money.”

“The system is good for those that are financially ridden. The good thing is that they don’t withdraw their entire savings, just a certain portion.”