South Africa's tax service, SARS, has reported a surge in pension withdrawals since a new reform allowing partial withdrawals before retirement came into effect six weeks ago. A total of 21.4 billion rand ($1.2 billion) has been paid out under the new "two-pot" pension policy.
The reform has seen a dramatic increase in withdrawal applications. While initial withdrawals in the first ten days after implementation totaled 4.1 billion rand ($235.5 million), SARS has now received over 1.2 million applications, a significant jump from the 160,000 applications.
The new system, designed to balance long-term retirement savings with short-term financial flexibility, 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 of 2,000 rand ($115), but only one withdrawal is permitted per tax year. These withdrawals are taxed at the individual's marginal tax rate, boosting government revenue.
Significant further withdrawals are expected in the final months of 2024, with the central bank estimating a range of 40 billion rand ($2.3 billion) to 100 billion rand ($5.7 billion) in the fourth quarter.