New season stirs two-pot rush

Alexander Forbes received more than 33,000 two-pot withdrawals claims in the first week of the new tax season, which began on March 1. 

“Our research shows that individuals who claimed in the previous tax year had a high likelihood of claiming again in the new tax year. This already appears to be the case, given the significant numbers of claims in just four days,” said Alexander Forbes spokesperson John Anderson.

He said the high appetite to withdraw so early in the tax year once again highlights that many South Africans are financially stretched.

“A previous survey done by Alexforbes showed that 80% of claimants used their withdrawals for debt repayment and essential living expenses. Now that we are in the new tax year, members may withdraw from this savings pot again following 260,000 logins to AF Connect (the company’s digital platform) in the first five days of the new season,” said Anderson.

Last month, the SA Revenue Service reported that more than 2.4-million workers cashed out R43-billion from their pensions funds after the two-pot pension system was launched in September last year.

While this new system provides much-needed financial relief for members facing short-term financial constraints, Alexforbes urges members to consider the long-term impact of withdrawing from their retirement savings and to remain vigilant against cybercrime threats.

Key considerations before withdrawing:

Impact on long-term retirement planning — Withdrawing funds from the savings pot means reducing the capital that will compound over time to provide financial security in retirement. Workers should carefully assess whether they genuinely need the funds or if alternative financial solutions are available.

Tax consequences — Withdrawals from the savings pot are subject to taxation as part of a member’s annual income. This could result in a higher tax bracket and an increased tax liability. 

Beware of cybercrime and fraud — With heightened activity around withdrawals, scammers and fraudsters may increasingly target retirement fund members.

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