- Before you apply for a withdrawal from the savings pot of your retirement fund check that your tax status is “compliant” – your returns are up-to-date and any outstanding taxes paid.
- Also, check your retirement fund is not one of the few that are excluded from the two-pot system or, if you are an older provident fund member, if you need to opt in.
- You must have enough in your savings pot to withdraw at least R2 000.
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The two pot retirement system will make it possible for you to make a withdrawal from the savings pot of your retirement fund. Before you do so, be sure you really need to make the withdrawal because you have no other alternatives and consider the impact on your future retirement savings.
If after considering your options, you want to go ahead and withdraw money from your savings pot, these are the steps you will need to take:
Check your retirement fund will be included in the two-pot system
Your fund may not be part of the two-pot system if:
You have an older retirement annuity (RA), or
You are a member of a provident or provident preservation fund who was 55 years or older on 1 March 2021, are still a member of the same provident fund and you have not opted into the system. If you want to be part of the two-pot system and withdraw from the savings pot, ask your administrator how you can opt-in.
Check your details
Check that your retirement fund has the right contact details for you and that you are receiving statements from your fund. You need to check that your fund has the correct cell phone number, email address and physical address for you.
Your fund should have sent you some communication with its contact details, or you can ask your employer’s human resources (HR) department or check if the administrator of your umbrella fund has set up a webpage for your fund.
Your fund or its administrator may have set up a digital platform for members. If so, you should sign up to this platform to check your details and to make an application for a withdrawal.
Be sure when you do so that you are on the correct platform provided by your fund or your employer’s HR department.
- Check your identity details
Make sure your retirement fund has the right identity document details – for example, if you have married and changed your name – be sure your administrator has the correct name and identity number for you.
If your fund has a different spelling of your name on its system to that in your identity document, your application will be rejected to avoid fraud.
Make sure your retirement fund has up-to-date banking details for you and that your bank account is in the same name as your identity document and the name the fund has for you.
Your fund will verify these details before making any payment to you and, if the details you submit in your withdrawal application do not match those the fund has on record for you, your fund will reject your application, and you will not get paid out. Funds are being very careful to prevent fraudulent withdrawals.
Make sure you have a tax number
In order to withdraw from your savings pot you will need a tax number – even if you are not paying tax because you earn below the tax threshold.
If your fund does not have your tax number, you will need to provide the administrator with proof of your tax number.
If you are employed, your employer should have registered you for tax regardless of how much you earn. Look on your payslip or IRP5 for the number.
If you are not sure if you have a tax number or you have forgotten the number, you can get it from the South African Revenue Service (SARS) here or look for “I need my tax number” on the SARS home page.
If you do not have a tax number, you will need to register for tax by using the SARS eFiling website or mobi app or by visiting a SARS branch – there is more info on this page on the SARS website.
REMEMBER
Your fund can only seed your savings pot from 1 September 2024,
based on the value of your fund as at 31 August 2024. It may take a few
days for your fund to get the up-dated values as of that date and to do
the seeding calculation for thousands of members. You will only be able
to apply for a withdrawal when your fund informs you it has seeded your
savings pot and is ready to accept your application.
Check your fund credit / savings pot balance
If you are preparing to make a withdrawal soon after 1 September 2024, check your fund credit to ensure you have a fund credit or balance of at least R20 000. If you do not, it means your savings pot will be seeded with an amount of less than R2 000 – the minimum withdrawal amount.
If it is after 1 September 2024 and you have a recent statement from your fund, check the balance in your savings pot is more than R2 000.
Check when last you withdrew from the savings pot
Check if you have made a withdrawal in the past tax year (since 1 March) – if you have, you will not be able to withdraw until the next tax year.
Check your tax affairs with SARS are in order
Before you apply for a withdrawal, make sure that your tax returns are up to date and any tax you owe has been paid to SARS.
If you have not filed the necessary tax returns, SARS can assess your tax based on the information it has from employers, financial institutions and third parties. If you have been assessed and SARS has decided you owe penalties and tax for failing to file tax returns, it is likely to deduct these amounts from any withdrawal from your retirement fund’s savings pot.
To check your tax affairs are in order, log on to the SARS eFiling site and choose “tax status” on the top right hand menu. Then select Tax Compliance Status on the menu on the left of the eFiling page and if you have not already done so follow the steps to Activate your status.
When it is active you should be able to check your “Tax compliance status” at the top left. It should have a green button saying “compliant”. If it is red and says “not compliant”, click on it to see what returns or taxes are outstanding.
File your outstanding returns to stop penalties accumulating and make arrangements with SARS to repay your outstanding taxes. If you have an arrangement in place to pay a certain amount each month, then SARS will not take the outstanding tax from your retirement fund withdrawal. Read more: Why should I not ignore my tax debt?
If you do not, SARS can instruct your retirement fund administrator to deduct what you owe from the withdrawal you make.
Find out how to apply for a withdrawal
Ask your retirement fund how you can apply for a withdrawal or look out for a communication from your fund as to the process you should follow. Most administrators will be encouraging members to use their digital platforms to make their withdrawals.
If you are employed, you can ask your HR department to advise you on the process.
Your fund, or your employer’s HR department, will direct you to the correct online process or form you need to complete.
Be sure when you complete the process or form to use the bank details that match those the fund has for you or update your bank details with the fund.
Supply the correct tax details
Before you can be paid, your fund has to apply for a tax directive from SARS and deduct the necessary tax.
Your fund’s administrator will ask you to provide certain details in order to apply for a tax directive from SARS. You need to supply the correct information to get the directive.
The fund will ask for your tax number and for your taxable income for the year.
SARS has yet to provide details on how you should declare that taxable income, but remember that at the end of the tax year, your tax will be assessed on the sum of:
- Gross income you earn from your employer for the year;
- Any income you earn from a business;
- Any income earned from renting out a property;
- Any taxable income earned from investments;
- Any income from a pension or annuity; and
- Any taxable capital gains you make.
This sum can be reduced by:
- Any expenses incurred to earn that income, such as expenses incurred in your business or expenses for maintaining your rental property;
- Any contributions to a retirement fund contributions you make within certain limits.
SARS is expected to provide a facility on its eFiling site to allow you to check the tax for which you will be liable, but this is not yet available.
Check the charges
Your retirement fund may charge you a transaction fee for making a withdrawal from your fund. Check with your fund or administrator what this charge will be and make sure you are comfortable having this fee deducted from your withdrawal.
Be patient
Any issues verifying your identity or bank details could delay your withdrawal. Even if all your details are correct, it could take days for your fund to obtain a tax directive and for the claim to be paid out, especially if your claim is one of many a fund receives soon after 1 September 2024.
Submit your application
Only when you are comfortable with the amount you get after tax and charges should you submit your application for a withdrawal. In terms of SARS’s rules, once a tax directive is issued, it cannot be reversed – the withdrawal will go ahead and the tax will be deducted and paid over to SARS.
Ask your fund if it has a facility that will allow you to track your claim.
Complaints
If you have a complaint regarding getting information about your fund or the way your withdrawal application is dealt with, first lodge a complaint with your fund. Only if you do not get a satisfactory response from the fund, take your complaint to the Pension Funds Adjudicator. If your complaint is about the tax deducted from your withdrawal, you retirement fund – and the administrator that acts on its behalf – cannot help you – you need to complain to SARS. If SARS does not assist you, you can approach the Tax Ombud.
This article was first publish on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (ASISA).
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