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The South African
3 days ago
- Business
- The South African
GOOD news for retiring South African expats in 2025
The two-pot savings scheme offers retiring South African expats one big advantage over regular citizens. Retiring South African expats are able to access their two-pot savings immediately, thereby sidestepping the three-year lock-in rule. As we've already reported, ever since the two-pot retirement system was introduced back in September 2024, fund member have withdrawn billions in funds. This is despite financial advisors decrying the long-term effects of saving efficacy. The scheme allows members to make one withdrawal from their savings pot every single year. Many are making lumpsum withdrawals to simply make ends meet or pay off debts. Which are clear signs of financial strain … Many retirees have worked their entire lives to live somewhere exotic like Mauritius when the turn 60. Image: File Nevertheless, retiring South African expats are not subject to the same restrictive three-year lock-in rules that govern the savings portion of regular residents. Expats who have formally ceased tax residency can access their retirement savings without delay. As such, the Retirement Matters Committee of the Actuarial Society of South Africa (ASSA) reports that 75% of applications in Q2 of 2025 were repeat claims. Up until February 2025, 2.6-million South Africans accessed part of their retirement savings. Therefore, it's plain to see that retiring South African expats are eager to obtain cash as soon as possible after ceasing tax residency. Furthermore, the South African Revenue Service (SARS) says R47 billion has paid to fund members since the scheme's start on 1 September 2024. In turn, this yielded R12 billion in tax revenue for the government. Surprisingly, this is more than double the R5 billion initially projected by the National Treasury when it introduced the scheme. However, something retiring South African expats should remember is their withdrawals – while not time limited – are not tax exempt. In fact, administrative withdrawal fees, and cross-border transfer regulations can make such transactions more costly. SARS insists that 'tax liability remains even after severing ties with the country.' Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1. Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
The South African
12-05-2025
- Business
- The South African
Major warning for SA's two-pot retirement system as repeat withdrawals SOAR
As South Africans adjust to the newly implemented two-pot retirement system, early warning signs suggest that the intended goal of safeguarding retirement savings may be undermined by a surge in repeat withdrawals. Data from retirement fund administrators reveals that during the first two months of the 2025 tax year -March and April – roughly 75% of withdrawal applications were repeat claims, highlighting a troubling pattern of short-term cash access that could jeopardise future financial security. The two-pot system, introduced on 1 September 2024, was designed to balance liquidity with preservation. It allows fund members to access one-third of their contributions through a savings component, while two-thirds remain locked in a retirement component until formal retirement. Under current rules, a member can withdraw from their savings pot once per tax year, provided the pot holds at least R2 000. The initial seeding of this savings component came from 10% of a member's pre-existing retirement savings, capped at R30 000. According to Natasha Huggett-Henchie, consulting actuary and a member of the Actuarial Society of South Africa (ASSA) Retirement Matters Committee, the average withdrawal during the initial access period in late 2024 was R20 000, with subsequent withdrawals falling to R6 000 on average. This decline reflects a concerning depletion of funds. Huggett-Henchie noted that members who emptied their pots shortly after implementation will now only have modest amounts – perhaps just R6 000 or slightly more, depending on monthly contributions and investment growth – available for withdrawal in the new tax year. 'If you emptied your savings pot in September last year and continued contributing R3 000 per month, you'd have around R6 000 available now, plus any investment growth,' she explained. Further compounding the issue are tax implications. Withdrawals are taxed by the South African Revenue Service (SARS) and may push individuals into higher tax brackets, making cashing out even more costly. Despite the financial accessibility offered by the two-pot system, Huggett-Henchie warned that it was never intended as a revolving credit facility. 'Every withdrawal should be carefully considered, as it diminishes the savings meant for your retirement,' she cautioned. A deeper concern, she added, is that informal lenders may be capitalising on the withdrawals. With no significant increase in loan repayments to banks or consumer spending reported by retailers, suspicions have grown that cash-strapped individuals may be turning to loan sharks, using withdrawals to service high-interest debt. Experts have begun calling for tighter oversight and improved financial education to prevent abuse of the system, which was initially designed to offer limited access to cash in emergencies – not to encourage a cycle of dependency that leaves retirement savings dangerously eroded. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1 Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
IOL News
09-05-2025
- Business
- IOL News
South Africans increasingly access retirement savings amid financial strain
South Africans are increasingly withdrawing from their retirement savings pots under the new two-pot system, with many making repeat withdrawals in a short span. Experts caution against this trend, highlighting the long-term impact on retirement funds. South Africans are rapidly withdrawing funds from their savings pots under the new two-pot retirement system, with many dipping into their savings for a second time in just a few months, according to Natasha Huggett-Henchie, consulting actuary and member of the Actuarial Society of South Africa (ASSA) Retirement Matters Committee. Retirement fund administrators have reported that 75% of applications for withdrawals in the current tax year are repeat claims, says Huggett-Henchie. While the average withdrawal amount in the first round of two-pot withdrawals was R20,000, this year's applications have dropped to an average of R6,000, says Huggett-Henchie. "We are finding that retirement members are taking all they can as soon as they can, she says. Introduced on September 1, 2024, the two-pot retirement system was designed to help South Africans access a portion of their retirement savings for emergencies while preserving two-thirds of their pension. The system allows retirement fund members one withdrawal per tax year, as long as their savings pot contains at least R2,000 plus relevant fees. To start the system, qualifying fund members had 10% of their total retirement savings (up to R30,000) transferred into their savings pots on September 1, 2024. Since then, many have emptied their accounts, leaving them without savings until they can make another withdrawal in March 2026, according to Huggett-Henchie. She says that for those who emptied their savings pot in September last year but continued contributing, their pot would now hold one-third of their monthly contributions over the past six months. For someone contributing R3,000 per month, this means their savings pot would contain R6,000 plus any investment growth, which could be accessed at the start of the new tax year in March 2025. Interestingly, Huggett-Henchie says that retirement fund members who did not touch their savings pot last September can withdraw the entire amount, even if it exceeds R30,000. "Using the earlier example, if your savings pot was seeded with R30,000 last year and has grown to R36,000, you are allowed to withdraw the full amount. Just remember to check on the tax impact before you decide to withdraw." While the new system provides flexibility, Huggett-Henchie cautions that fund members should carefully consider whether they should withdraw just because they can. 'Every time you make a withdrawal now to fund something other than an emergency, you must understand that you are reducing your future emergency fund. If you empty your savings pot every year, you will effectively have reduced your retirement savings by one-third, which is significant," she says. One of the most unexpected beneficiaries of these withdrawals may be loan sharks, she speculates. "It seems banks have not seen a big paydown of loans, and retailers have not reported a massive uptick in sales." However, Huggett-Henchie acknowledges that some retirement fund members are using their savings pots wisely, with one individual opting to borrow money from their savings pot instead of taking out a loan for school fees. 'Every year, she would have to take out a loan to fund her children's school fees. In January this year, she decided to borrow the money from her savings pot and repay it every month, just as she would have had she taken a loan. This way, the money is still there for next year's school fees, and she is no longer in debt," she says. Looking ahead, Huggett-Henchie says the next major challenge facing the retirement funds industry is dealing with small accumulated amounts in retirement pots when employees resign or are retrenched. Many of these amounts are too small to move into a preservation fund or retirement annuity, but under two-pot rules, fund members cannot take the money in cash either. 'Until this is addressed in the next phase of the two-pot regulations, fund administrators will have to find cost-effective ways of dealing with these 'problem pots',' she says. PERSONAL FINANCE
The Citizen
06-05-2025
- Business
- The Citizen
Two-pot retirement system: 75% of second year withdrawals are repeats
South African pension fund members' withdrawals under the two-pot retirement system show how desperate they are for extra money. Pension fund members could withdraw from the savings pot of their funds under the two-pot retirement system for the second time since the beginning of the tax year on 1 March, and 75% of the withdrawals are from members who also withdrew in the previous financial year. The two-pot retirement system, implemented on 1 September last year, allows pension fund members to dip into their savings pot once in a tax year, provided they have more than R2 000 plus the relevant fees saved in their savings pot. Natasha Huggett-Henchie, consulting actuary and member of the Actuarial Society of South Africa's Retirement Matters Committee, says the new system was designed to force retirement fund members to preserve at least two-thirds of their retirement benefits in one pot that cannot be accessed before retirement, while allowing access to the remaining third in the savings pot when they need money for emergencies. 'To kick off the two-pot system, the savings pots of qualifying retirement fund members were seeded with 10% of their retirement savings up to R30 000 on 1 September 2024. Members could withdraw what was in their savings pots, as long as it was R2 000 or more after fees.' ALSO READ: Two-pot retirement system: withdrawals not being used for emergencies 75% of two-pot retirement system withdrawals are repeats She reveals that many of the retirement fund members who requested withdrawals from their savings pots in March and April 2025, the first two months of the new tax year, were dipping into their savings pots for a second time. Retirement fund administrators represented on the committee reported that around 75% of the applications they received in the current tax year were repeat claims. 'While the average withdrawal was R20 000 in the first round of two-pot retirement system withdrawals, the average withdrawal for applications submitted after 1 March for the current tax year is around R6 000. We are finding that retirement members are taking all they can as soon as they can.' ALSO READ: EDITORIAL: Two-pot withdrawals show how much SA is battling People who withdrew now will have to wait until March 2026 to withdraw again Huggett-Henchie points out that retirement fund members who made their second withdrawal early in this tax year will have to wait until March 2026 before they can dip into their savings again. 'If you emptied your savings pot in September last year and continued to contribute to a retirement fund, you would have started the new tax year on 1 March 2025 with one-third of your monthly retirement fund contributions accumulated over six months in your savings pot. If, for example, you contribute R3 000 a month to your retirement fund, R1 000 goes to your savings pot. That means you would have been able to access another R6 000 plus any investment growth at the start of the new tax year.' She explains that retirement fund members who did not touch the money in their new savings pots when they became available last September can withdraw the entire amount, even if it is more than R30 000. 'For example, if your savings pot was seeded with R30 000 last year and has grown to R36 000, you are allowed to withdraw the full amount.' ALSO READ: Two-pot retirement system: People taken aback by amount of tax – survey Before you withdraw under two-pot retirement system, first check the tax However, she warns pension fund members to first check how much tax they will pay before they decide to withdraw. 'Withdrawals under the two-pot retirement system are taxed by the South African Revenue Service (Sars) either at members' current marginal tax rate or at a higher rate if the withdrawal pushes you into a higher tax bracket. In addition, you will most likely have to pay an administrative fee as well. Therefore, Huggett-Henchie says, members must not expect to get the full amount they applied for. ALSO READ: The danger of using two-pot retirement system savings for emergencies Think before withdrawing under two-pot retirement system She also reminds members to think about withdrawing first. 'Just because you can, it does not mean you should. Every withdrawal should be carefully considered, because you are effectively reducing the savings meant to provide for you when you are too old to work and earn a living. 'Therefore, every time you make a withdrawal now to fund something other than an emergency, you must understand that you are reducing your future emergency fund. If you empty your savings pot every year, you will effectively have reduced your retirement savings by one-third, which is a significant amount.' Huggett-Henchie says she suspects that one of the biggest beneficiaries of the withdrawals under the two-pot retirement system may have been loan sharks. 'It seems banks have not seen a big paydown of loans and retailers have not reported a massive uptick in sales.' ALSO READ: Two-pot retirement system: rather find an alternative than dip into the savings pot Using your two-pot retirement system withdrawal in the right way However, she has encountered one retirement fund member using her savings pot money to avoid debt. 'A member of one of the funds we administer explained that every year, she would have to take out a loan to fund her children's school fees. 'In January this year, she decided to borrow the money from her savings pot and repay it every month, just as she would have for a loan. This way, the money is still there for next year's school fees, and she is no longer in debt.' Huggett-Henchie says the next challenge facing the retirement fund industry is employees resigning or being retrenched with small amounts accumulated in their retirement pots. 'These amounts are often too small to move into a preservation fund or retirement annuity because they do not meet the minimum investment requirements, but in terms of the new two-pot rules, the fund member can also not choose to take the retirement benefit in cash. 'Until this is addressed in the next phase of the two-pot regulations, fund administrators will have to find cost-effective ways of dealing with these 'problem pots',' she says.
