September 04, 2024
Surge in Withdrawal Requests on First Day of South Africa's Two-Pot Retirement System
On September 1, 2024, the first day of South Africa's new two-pot retirement system, the South African Revenue Service (SARS) processed nearly 2,500 tax withdrawal directives. SARS Commissioner Edward Kieswetter revealed that by Monday night, the revenue service had received 2,759 directives, with 2,424 processed by Tuesday morning.
These withdrawals amounted to R103 million, contributing approximately R6.7 million in taxes. Kieswetter emphasized that SARS is committed to processing tax directives as quickly as assessments, aiming for a five-second turnaround using Artificial Intelligence (AI). However, he noted that delays could occur if individuals are not registered for tax, have outstanding returns, or owe money to SARS.
Financial experts warn that accessing retirement funds early could jeopardize long-term financial security. John Manyike, head of financial education at Old Mutual, cautioned that premature withdrawals can hinder the growth potential of retirement funds, reducing future dividends and interest earnings. For instance, R20,000 saved over ten years could grow to about R35,817 with compound interest at a 6% annual rate. Manyike also pointed out that inflation and rising living costs could outpace the income from reduced retirement savings, potentially forcing individuals to work longer to maintain their desired lifestyle in retirement.
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