According to the South African Revenue Service (Sars) Commissioner, Edward Kieswetter, close to 2,500 tax withdrawal directives were processed on the first day (September 1, 2024), when the system came into effect.
Kieswetter told Daily Maverick that Sars is focused on trying to make sure that all the tax directives are processed in the same amount of time as an assessment, that being five seconds, using Artificial Intelligence (AI).
He noted that there are certain requirements one needs to have for your directive to be processed expeditiously.
“The three things that would prevent that would be if you were not registered for tax, you have outstanding returns or you owe Sars money. So, we tried to address that ahead of the two-pot system coming into effect,” the commissioner said.
Kieswetter noted that by Monday night, Sars had received 2,759 tax directives and the revenue service had already processed 2,424 tax directives by Tuesday morning.
This represents R103 million worth of withdrawals from retirement funds and will add around R6.7 million of tax to the fiscus.
High volumes
Due to the high number of South Africans trying to withdraw or process their funds, a number of fund websites had to issue warnings on Monday and Tuesday, including Alexforbes and Momentum.
Old Mutual issues a warning
Old Mutual has warned South Africans that withdrawing from their savings may have huge ramifications for their future.
The financial institution said that using retirement money to fix your immediate cash-flow problems could lead to a financially difficult old age.
John Manyike, head of financial education at Old Mutual said that there are millions of elderly South Africans who spend their retirement years wondering if their money will see them through to their last days.
Manyike noted that South Africans should be aware that when money is taken out early from a fund it can impact the chances to benefit from potential fund growth, dividends, and interest that could be earned if the money stayed in the retirement account.
“If you saved R20,000 for 10 years instead of being moved from a fund, compound interest would make it worth about R35,817 (For illustrative purposes for this calculation, an annual interest rate of 6% compounded annually was used),” Manyike explained.
Manyike also argued reducing retirement savings means that as inflation and everyday costs increase, the member will be faced with the reality that their retirement income is restricted and cannot keep pace with price changes.
Lastly, he advised that if a person withdraws too much from their retirement fund, they may have to work longer to try and earn some extra money so that they can enjoy the retirement lifestyle they want.
IOL BUSINESS