Africa-Press – South-Africa. South African expatriates are increasingly withdrawing from their retirement fund Savings Pot under the two-pot retirement system since they have immediate access to these funds under the new system.
This is according to John-Paul Fraser, team lead of cross-border taxation at Tax Consulting SA, and Shuanita de Wet, retirement & pension fund specialist at Tax Consulting SA.
Only two months into the new tax year, many South Africans have again dipped into their retirement fund Savings Pot after also making a withdrawal in the previous six months.
Retirement fund administrators represented on the Retirement Matters Committee of the Actuarial Society of South Africa (ASSA) reported that around 75% of applications already received in March and April 2025 were repeat claims.
This follows after more than 2.69 million South Africans accessed a part of their retirement savings under the Two Pot Retirement System in the tax year ending February 2025.
According to experts, this is a clear indication that many South Africans are eager to obtain extra cash as soon as possible.
According to the South African Revenue Service (SARS), a gross lump sum of R47 billion was paid to fund members from their Savings Pot in the six months after the implementation of the Two Pot System on 1 September 2024.
This yielded nearly R12 billion in tax revenue, almost double the R5 billion initially projected by the National Treasury. Under the new system, pension fund members are allowed one withdrawal from the Savings Component in a tax year.
South African expatriates residing abroad are most certainly among those who withdrew money from their Savings Component, which was seeded with up to 10% of their pension fund credit as of 31 August 2024, capped at R30,000.
This once-off transfer came from the funds accumulated in the vested pot up to that point, Fraser and De Wet explained.
Before 1 March 2021, individuals could withdraw retirement interests immediately after formalising their emigration with SARS and the South African Reserve Bank (SARB).
This applied to a range of retirement products, including Pension Funds, Preservation Funds, Provident Preservation Funds, and Retirement Annuity Funds.
Since then, the 3-year lock-in rule has applied, requiring a non-resident taxpayer to maintain their non-resident status for three years or longer before becoming eligible for early withdrawal of lump sum benefits from South Africa.
Good news for expats
The good news for expatriates still with retirement funds in South Africa, Fraser and De Wet explained, is that the lock-in rule does not apply to the money in the Savings Pot. It is immediately accessible.
You can withdraw money from the Savings Pot of all your retirement products once in a tax year. Since 1 September 2024, retirement contributions have been split into two groups.
One-third of the contribution goes to the Savings Pot and two-thirds to the Retirement Pot, which is preserved until retirement.
However, expats considering using this money must remember that it comes with tax implications, carries an administrator’s withdrawal fee, and is subject to regulations on cross-border transfers.
All withdrawals from the Savings Pot are taxed at the taxpayer’s marginal rate. This also applies to South Africans who have formally ceased tax residency.
Although they may have severed tax ties with SARS to protect their worldwide income from being taxed in South Africa, they remain liable for tax on South African-sourced income, Fraser and De Wet explained.
SARS said in the tax year ending February 2025, the most applications for Savings Pot withdrawals received were from the following groups:
Almost 768,000 in the tax rate bracket of 0.01% to 18%;
642,544 in the rate bracket between 18.01% and 30%; and
640,335 in the bracket between 30.01% and 40%.
By the end of January 2025, SARS’ simulated WhatsApp calculator had been used 90,283 times since the implementation of the process.
The Two-Pot retirement system calculator, part of the SARS Online Query System, assists pension fund members with an illustrative amount of what they can expect as a payout.
In order to accurately calculate the payout, SARS emphasised that all relevant and accurate information must be provided.
Alexforbes said since the start of the new tax year on 1 March 2025, it has already received over 33,000 savings pot withdrawal claims from members.
This highlights that many South Africans are experiencing financial pressure. A previous survey done by Alexforbes showed that 80% of claimants used their Savings Pot withdrawals for debt repayment and essential living expenses.
After ceasing tax residency, transferring funds abroad can be complex. For instance, your authorised dealer (bank) must verify the source of funds.
Nonresident taxpayers need an Approval International Transfer (AIT) PIN from SARS to transfer funds to their overseas bank account.
The ‘exit tax’
Fraser and De Wet also noted that upon ceasing tax residency, you will be deemed to have disposed of your assets at market value on the day before departing South Africa.
This may trigger a Capital Gains Tax liability if a capital gain is realised. This is also known as an “exit tax.” Items included in the exit tax are generally:
Foreign fixed property
Global shares, unit trusts and similar investments
Crypto assets and similar investments
In certain cases, trusts
Items excluded are generally:
South African fixed property in your own name
Retirement funds, such as pension, provident, and retirement annuities
Personal use assets such as motor vehicles and furniture
Cash
Despite some challenges, such as application rejections and concerns over tax burdens, the system has provided a valuable option for many individuals seeking early access to a portion of their retirement savings, they said.
As the system continues to evolve, monitoring its impact on long-term retirement security and financial planning for South Africans will be crucial.
Those who feel they missed out on their annual savings withdrawal last year should seek professional guidance on accessing their Savings Pot amounts to avoid any surprises from SARS.
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