How to withdraw from Two-Pot Retirement System?

The Two-Pot Retirement System allows you to withdraw funds from the savings pot of your retirement fund. However, before making a withdrawal, consider if it’s truly necessary, as it may impact your future savings.

If you decide to proceed, follow these simple steps:

1. Confirm Your Fund’s Eligibility

First, check if your retirement fund is part of the Two-Pot System. It may not be if:

• You have an older retirement annuity (RA), or
• You were 55 years or older on March 1, 2021, and are a member of a provident or provident preservation fund who has not opted into the system.

If you want to opt-in, ask your fund administrator how to do so.

2. Update Your Contact Information

Ensure your retirement fund has your correct contact details, including your phone number, email, and physical address. This ensures you receive important communications.

Many funds offer digital platforms for members. Sign up to check and update your details, and make sure you’re using the correct platform provided by your fund or employer.

3. Verify Your Identity Details

Make sure your retirement fund has the correct identity details, especially if you’ve changed your name (e.g., after marriage). If the details don’t match your ID, your application will be rejected to prevent fraud.

4. Check Your Bank Details

Your retirement fund must have your current bank account information. The account must match the name on your identity document. Incorrect details will result in your application being rejected.

5. Obtain a Tax Number

You’ll need a tax number to withdraw from your savings pot, even if you don’t currently pay taxes. If your fund doesn’t have your tax number, you’ll need to provide proof of it.

If you’re employed, check your payslip or IRP5 for your tax number. If you’re unsure if you have one, you can retrieve it from the South African Revenue Service (SARS) website. If you don’t have a tax number, you’ll need to register for one through SARS.

6. Check Your Savings Pot Balance

After September 1, 2024, make sure your savings pot has at least R2,000. If your balance is below this, you won’t be able to withdraw.

7. Confirm Recent Withdrawals

You can only make one withdrawal per tax year. If you’ve already made a withdrawal since March 1, you’ll need to wait until the next tax year to withdraw again.

8. Ensure Your Tax Affairs Are in Order

Before applying for a withdrawal, make sure your tax returns are up to date and that you’ve paid any taxes owed to SARS. If you have outstanding taxes, SARS may deduct the amount from your withdrawal.

9. Learn How to Apply for a Withdrawal

Ask your retirement fund or HR department how to apply for a withdrawal. Most funds will encourage you to use their digital platforms. Make sure your bank details are correct when you complete the application.

10. Provide Correct Tax Details

Your fund will apply for a tax directive from SARS on your behalf. You’ll need to provide accurate information, including your tax number and taxable income for the year.

11. Check for Fees

Your retirement fund may charge a transaction fee for the withdrawal. Confirm what the fee is and make sure you’re comfortable with it being deducted from your withdrawal.

12. Submit Your Application

Only submit your application when you’re satisfied with the amount you’ll receive after tax and fees. Once a tax directive is issued, it can’t be reversed.

If there are any issues with verifying your identity or bank details, your withdrawal may be delayed. Even if everything is correct, it could take several days for your payment to be processed.

13. Handle Complaints

If you have a complaint, first address it with your retirement fund. If unresolved, you can escalate the issue to the Pension Funds Adjudicator. For issues related to tax deductions, you’ll need to contact SARS or the Tax Ombud.

This article was first published on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (ASISA).