The ability to withdraw some of your savings from your retirement fund - maximum R30,000 before tax - may have a positive impact on consumer confidence.
This is according to Chantal Marx, head of investment research at FNB Wealth and Investments, who noted that the introduction of the two-pot system, together with possible interest rate cuts, decent momentum in wages, and lower inflation could boost consumer confidence and drive an increase in spending in the months ahead.
The impact of the two-pot system will in turn have a positive impact on domestic retailers, particularly discretionary names (clothing and furniture mainly), Marx added.
“There could also be some benefit accruing to the banks, as savers may utilise their withdrawals to pay down debt, which could improve asset quality and free up capital to drive higher quality loan origination as well as higher transaction activity,” the investment researcher said.
The two-pot retirement system came into effect from September 1, 2024. The new regime allows some South Africans the luxury of withdrawing from their pension savings once a year, subject to a maximum of R30,000.
Marx estimated that about R40 billion will be withdrawn from pension assets when the two-pot system comes into effect.
“While this is a chunky figure, it is less than what is typically lost in early access every year, although this is anticipated to still be a factor but to a much smaller extent,” he explained.
The tax implications
It should be noted that tax will be payable on the withdrawn money from the two-pot system.
This tax will be 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 deduct R 2,500.
Pat Ndaba, a lead engineer for the tax directive project under personal income tax at Sars said that the organisation required that you must be registered for income tax, and your tax affairs must be in order, meaning your returns must be up to date.
Ndaba said that there must be no debt owing that is due to Sars and you may use the “Lumpsum tax calculator” on eFiling to check the tax amount that could be deducted from your savings benefit
She said that if there is an existing debt due on the taxpayer's account, the savings withdrawal can be used to settle this debt before any payment is made to you by the fund administrator.
Lastly, she explained that there will be a fund admin fee also, which is determined by the fund, when you decide to withdraw from the savings, Sars does not control or collect them.
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