As South Africans prepare to take part in the two-pot retirement system, the African Transformation Movement (ATM) has called for the system to be re-evaluated.
The two-pot retirement system took effect on September 1, 2024, and would allow South Africans to withdraw from their savings every year.
This amount is subject to tax and would depend on an individual’s tax allocation.
ATM said that the the current limit on pension withdrawals, which is capped at R30,000 needs to be addressed.
“The implementation of the government's two-pot retirement system poses significant risks to workers already struggling under the weight of debt. The current limit is insufficient to alleviate their financial burdens and could instead exacerbate their dire situations,” ATM’s president Vuyo Zungula said.
“The intention behind the two-pot system was to provide workers with access to their funds during emergencies. However, the reality is that withdrawing even a portion of their pension savings will push many into a deeper debt spiral, primarily due to the hidden taxes and administrative fees associated with such withdrawals,” he explained.
Zungula said that South African workers may find themselves facing substantial tax liabilities not only from the withdrawal itself, but also from potential increases in their taxable income brackets.
The political party argued that the R30,000 cap is inadequate for addressing the overwhelming indebtedness that many workers face.
“This limit fails to provide meaningful relief and instead serves to perpetuate a cycle of poverty and financial instability,” Zungula said.
He has called on government to revise the maximum withdrawal cap and consider allowing workers to access one-third of their pension savings without the restrictions currently in place.
“This change is essential to empower workers, enable them to regain control over their finances, and provide them with a pathway to financial recovery,” Zungula added.
Tax implications
So how much tax will you have to pay when you decide to withdraw from your savings?
The tax you have to pay is equivalent to your normal tax rate.
So, if you have a tax rate of 25%, the taxman will deduct this from the amount taken out. So, if you access R 10,000, the South African Revenue Service (Sars) will want R 2,500.
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