JOHANNESBURG, Oct 11 - South Africa's tax service announced that 21.4 billion rand (approximately $1.2 billion) has been withdrawn from pension funds in the six weeks since the implementation of a new reform allowing partial withdrawals before retirement.
The 'two-pot' pension policy reform aims to enhance long-term retirement savings while providing flexibility for members facing financial difficulties. This initiative is anticipated to boost domestic demand and economic growth in the latter part of 2024.
Since the reform took effect on September 1, the South African Revenue Service (SARS) reported that individuals requested to withdraw 4.1 billion rand from their pensions within the first 10 days. By October 11, the total number of savings withdrawal applications surged to approximately 1.2 million, a significant increase from 160,000 applications during the first ten days of September.
The reform divides retirement contributions into a savings component (one-third) and a retirement component (two-thirds). The savings component is accessible at any time, with a minimum withdrawal amount set at 2,000 rand, and only one withdrawal is permitted per tax year. Withdrawals will be taxed at the individual's marginal tax rate, which is expected to contribute to the government's tax revenue.
The central bank projects that total withdrawals could range from 40 billion rand to 100 billion rand in the fourth quarter of 2024.