{"id":1795,"date":"2024-07-19T06:13:37","date_gmt":"2024-07-19T06:13:37","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1795"},"modified":"2026-03-18T11:46:06","modified_gmt":"2026-03-18T11:46:06","slug":"retirement-fund-tax-warning-from-sanlam","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2024\/07\/19\/retirement-fund-tax-warning-from-sanlam\/","title":{"rendered":"Retirement fund tax warning from Sanlam"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-1796\" src=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Retirement-sad-768x432-1.jpg\" alt=\"\" width=\"768\" height=\"432\" srcset=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Retirement-sad-768x432-1.jpg 768w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Retirement-sad-768x432-1-300x169.jpg 300w\" sizes=\"auto, (max-width: 768px) 100vw, 768px\" \/><\/p>\n<p>Withdrawals from your retirement fund will be taxed heavily and significantly impact your outcomes following your work career, even under the new two-pot system.<\/p>\n<p>This is feedback from Sanlam\u2019s consulting actuary, Ryan Campbell-Harris, who explained how early withdrawals will result in hefty tax obligations in the company\u2019s Benchmark Survey for 2024.<\/p>\n<p>The new two-pot retirement system aims to promote the preservation of retirement savings until maturity while limiting access to a portion of those savings in an emergency.<\/p>\n<p>This is the most significant change to the retirement system, with members being allowed one annual withdrawal from their savings pot.<\/p>\n<p>This will require all future contributions made to retirement funds to be split into two portions \u2013<\/p>\n<ul class=\"wp-block-list\">\n<li><strong>Two-thirds<\/strong>\u00a0of your contribution will be allocated to a retirement component, which must be preserved until you retire.<\/li>\n<li><strong>The remaining one-third<\/strong>\u00a0will be allocated to a savings component, from which you can withdraw once per tax year before retirement.<\/li>\n<\/ul>\n<p>There will be a third pot for individuals with an existing retirement fund that retains the value of all their contributions before the implementation of the new system on 1 September.<\/p>\n<p>Even though the savings pot is intended to be available as a lump sum at retirement, members can access up to 100% of their savings pot once per year before retirement. The minimum withdrawal amount is currently R2,000.<\/p>\n<p>Members will be forced to preserve their retirement pot until retirement. It will then need to be used to purchase a pension either from an insurer or from the fund to which they belong.<\/p>\n<p>Should a member decide to access their savings pot before retirement, the withdrawal transaction will be treated as additional annual income and taxed at the member\u2019s marginal income tax rate.<\/p>\n<p>All administration costs of the withdrawal transaction will also be deducted from the savings withdrawal benefit.<\/p>\n<p>Campbell-Harris said this will significantly impact the amount a member receives when withdrawing from their retirement fund early and the amount of tax they pay.<\/p>\n<p>He gave an example of someone who withdraws R10,000 from their retirement fund under the new two-pot system.<\/p>\n<p>Assuming this individual earns between R370,000 and R512,000 a year and is taxed at a marginal rate of 31%, they will lose nearly half of the withdrawal amount to tax and transaction fees.<\/p>\n<p>This member will receive only R6,762 of the R10,000 withdrawal. R200 will go to the transaction fee, and the rest will be lost to tax.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-1797\" src=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Sanlam-1-1024x576-1.jpg\" alt=\"\" width=\"1024\" height=\"576\" srcset=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Sanlam-1-1024x576-1.jpg 1024w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Sanlam-1-1024x576-1-300x169.jpg 300w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2024\/07\/Sanlam-1-1024x576-1-768x432.jpg 768w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<h6>Credit by: Shaun Jacobs<\/h6>\n","protected":false},"excerpt":{"rendered":"<p>Withdrawals from your retirement fund will be taxed heavily and significantly impact your outcomes following your work career, even under the new two-pot system. This&hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1795","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1795","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1795"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1795\/revisions"}],"predecessor-version":[{"id":1798,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1795\/revisions\/1798"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1795"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1795"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1795"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}