Finance minister Enoch Godongwana has warned against hasty withdrawals of pension funds as part of the two-pot retirement system, which comes into effect on the first of September.
The system allows retirement fund members to access savings without resigning or cashing out pension funds entirely. Godongwana said he is unfazed about those complaining about taxing the withdrawals.
“I would not encourage anyone to access these funds. This is their future savings. We will tax you as this is an additional income, why would people think that this is tax free when it is money coming into your account, “he added.
Speaking on VOC Breakfast on Friday morning, Nwabisa Bidla, Operations Manager for Tax base broadening and Education provided an outline of how withdrawals from the two-pot system will work.
“As of the 1st September, you would be able to make withdrawals from your pension fund from as little as R2000 to R30 000 per year, and this will be subject to tax. Once you indicate to your pension fund that you want to withdraw monies, they will communicate with the South African Revenue Services (SARS) and we will then check if you are tax compliant and have an existing tax number, if you do not, we can decline the directive,” she added.
Bidla further said those who owe SARS monies and have an existing payment agreement will not be penalized.
“In the event that you withdraw from the fund, whatever monies are owed to SARS, we can deduct it from your payout, but if you do have an agreement to pay us off, we will continue that agreement and we will only tax you based on the amount received,” she added.
Bidla further stressed that accessing the two-pot system should only be done in case of emergency.
“The system was implemented to assist those finding themselves in dire financial constraint and in need of financial reprieve. It is important to note that withdrawals can only be done once in a financial year and you will be taxed per withdrawal,” she added
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