Keen interest in two-pot system

Insurance companies say they have received significant interest in the two-pot system, with the South African Revenue Service (Sars) reporting that close to 2 500 tax withdrawal directives were processed on the first day that the system opened for applications on September 1.

The two-pot system will allow workers to withdraw up to R30 000 from their retirement funds.

Withdrawals from the fund will be taxed at the marginal tax rate with economists warning members of the public to be wary of the tax implication when making withdrawals from their retirement funds.

Sars commissioner Edward Kieswetter said that by Monday night, Sars had received 2 759 tax directives and the revenue service had already processed 2 424 tax directives by Tuesday morning.

“This represents R103 million worth of withdrawals from retirement funds and will add around R6.7 million of tax to the fiscus.”

Michelle Moller, Sanlam’s business head for shared services, said that they are experiencing significant interest in the two-pot retirement system since its launch.

“While the number of client applications are still being consolidated, we confirm substantial enquiries and applications from clients who have been engaging Sanlam through various secure web platform channels and our call centres.

Despite the high volumes, all Sanlam systems remain functional. In anticipation of client interest, we proactively prepared and additional resources are deployed to support clients.”

Moller said that Sanlam is committed to processing requests as soon as all members' information is in order.

“While the two-pot application process is multi-faceted and inherently longer compared to a traditional transactional withdrawal, due to the legislative and tax steps involved, Sanlam is committed to processing requests as swiftly as possible once all required client information is submitted and a client’s tax directive is received from the Receiver of Revenue.

“We encourage clients to consult their intermediaries to fully understand the implications of their withdrawal decisions, including the impact on long-term retirement savings and the tax implications.”

Old Mutual said their two-pot implementation process will take place in two phases.

“This will ensure the system can handle the large volumes of withdrawal applications that we anticipate as well as ensure that the applications process is safe and seamless with as few glitches as possible. In the first phase, from 2 to 22 September, Old Mutual customers will be able to view their Savings, Retirement and Vested Pot balances via the Old Mutual channel on WhatsApp. This means customers will be able to see exactly how much they have in each pot and what is available for withdrawal from the Savings Pot.”

Old Mutual said that the next phase starts on 23 September, when their channel on WhatsApp will start accepting withdrawal applications.

“Once an application has been received, it will undergo a vetting process to ensure that the personal details supplied match the information in our system. We also want to remind customers that the process from application to receiving money in their bank account may take some time because of the large volumes we expect and to accommodate the Sars process to issue tax directives.”

Waldo Krugell, an economics professor at North-West University, said that withdrawals will be taxed at an individual’s marginal tax rate.

“It is steep but fair that a withdrawal is taxed as income and not as pension. It also discourages withdrawals, which I think is a good thing. Every one of us needs that money to stay out and grow for retirement and a fund cannot make a payout to someone who is in arrears with Sars, that has to be sorted out first.”

Economist Dawie Roodt said that people need to apply for a tax directive from Sars when doing a withdrawal from the two pot system.

“This will have to be settled with Sars before you are able to withdraw from your retirement fund. So it is theoretically possible that you can withdraw from the two-pot system and get nothing due to tax. I also don’t think high-income earners will withdraw from the funds as their marginal tax rate will mean they might get half of the amount they wanted to withdraw.”

Congress of South African Trade Unions (Cosatu) said that there has been huge interest from members since the two-pot system opened for applications.

Matthew Parks, acting national spokesperson said the union is pleased with the two-pot pension reforms, which were championed for many years, are finally a reality.

“This is a massive shift in pension funds. Thousands of workers have made contact with their pension funds and for the first time workers can access part of their pensions without having to resign. This gives workers a far better option when seeking to settle debt than to leave their jobs.”

Parks said some funds have been overwhelmed but in most cases it is going well.

“We are meeting daily with government and pension funds to resolve issues as they arise and we are intervening in cases where unnecessary delays arise.”

The Mercury