Trade unions and financial experts have warned the public to be mindful of the impact on their retirement fund when withdrawing money in terms of the two-pot savings system.
This as Sanlam revealed that it had processed more than 60 000 applications since the launch of the two-pot retirement system on September 1.
The system allows workers to withdraw up to R30 000 from their retirement fund.
Sanlam said clients should consider the negative impact of early withdrawals on their retirement proceeds, which “could be significant as they may lose out on many years of compounded returns.”
Anna Siwiak, head: Product Development for the Sanlam Umbrella Solutions, said that they are seeing notable trends among middle-aged, middle-income individuals opting to withdraw funds.
“This group often balances the dual pressures of immediate financial responsibilities and future planning and seems to be leveraging the two-pot system for short-term relief.
“It's crucial, however, to understand the long-term implications of their choices, as tapping into these savings now can impact their retirement outcomes.”
Sanlam said that of the more than 60 000 Sars tax submissions processed to date, the tax entity had issued over 6 000 IT88 restrictions to members with outstanding tax issues.
“A little over 600 members received zero payments. Although the withdrawal claims process is multi-faceted due to the legislative and tax steps involved, we remain committed to processing requests as swiftly as possible once all required client information is submitted and a client’s tax directive is received from the Receiver of Revenue.”
Abigail Moyo, spokesperson for the trade union Uasa, said members of retirement funds should consider the impact of early withdrawal on their retirement savings.
“With research indicating that the majority of South Africans do not have enough saved for their golden years of retirement, caution needs to be exercised.
“Whilst there are legitimate reasons for a withdrawal such as excessive debt or financial distress, the long-term effect of the reduction in a pensionable income that may not be sufficient to sustain one, upon retirement, must be taken into account.”
Matthew Parks, acting national spokesperson for trade union federation Cosatu, said they were pleased with the progress made in rolling out the pension reforms.
“The point of the reforms is to give workers choices, to ensure that pensions support workers during times of need in their careers and in retirement.
“It gives an alternative to resignations and depletion of funds whilst helping ease workers’ debt burdens and boosting savings in the long term.
Each worker must assess what makes sense for them. If they are drowning in debt and tapping into their relief can help reduce the debt burden and free up their salaries to take care of their families or to pay for medical or other financial emergencies, then the two-pot reforms offer an option.”
Professor Irrshad Kaseeram of the University of Zululand’s economics department, said that Stats SA data indicated that so far R4.1 billion was claimed largely by those in the 35-44 year age group.
“Assuming the real return (ie. adjusting for inflation) is 6% per annum on one’s pension/provident fund investment then at retirement beneficiaries will receive R6 415 to R11 450 less for every R2 000 they withdraw when they are 20 to 30 years from retirement. This is indeed scary for it means they will become a burden to their families and the government in their golden years.”
Waldo Krugell, an economics professor at North-West University, said it was worrying that middle-aged people were withdrawing from the two-pot system, as money that could be growing for 30 years was being taken out 20 or 30 years earlier.
The Mercury