Slightly more males than females applied for withdrawals from the two-pot retirement system, with demographic analysis revealing that most applicants were aged between 40 and 49.
The Momentum Group told TimesLIVE Premium that it had received 79,081 withdrawal applications up to September 10. This is from across all the group's businesses including Momentum Corporate, Momentum Investments, Momentum Investo, Metropolitan and the legacy products in Momentum.
Of the R950m applied for, applicants received 82% of the amount with 18% flowing to the South African Revenue Service (Sars) and the group processed and paid withdrawal amounts into clients’ bank accounts from Monday, September 2, being the first to pay such withdrawals, said Momentum Group’s head of reputation Anneke Hanekom.
“The large volumes of withdrawal requests placed a strain on our employees, but we put in extra hours and personnel to process requests, and our AI bots relieved much of the load. We prepared well in advance of September 1 in anticipation of a higher than usual volume, and we managed well and were one of the first to start making payments,” she said.
The National Employers' Association of South Africa said the system was destructive and should only be used as a last resort.
Sars announced on Wednesday that it has received 161,607 tax directive applications since the implementation of the two-pot retirement system that came into effect on September 1.
Sars said the gross lump sums for the applications received amounted to R4.1bn.
The demographic analysis showed those aged between 40 and 49 dominated the applications.
“However, as time passed, their share of the cumulative total — from September 1 to 9 — declined from more than 50% to less than 40%, as more people in other age groups started to apply ... Slightly more males (55%) than females (45%) applied for withdrawals. However, recently, the percentage of males applying for withdrawals started to increase,” said Hanekom.
The applications for withdrawal indicate the unequal income distribution in the country and the dire economic circumstances faced by the poor. The low-income group, which does not earn enough to pay income tax, are dominating in applications which makes up just less than 60% of all applications by September 10 from 50% the previous day.
“Thereafter, the share declines as income increases. However, more than 10% of applications accrued from individuals with a taxable income of R500,000 per year and more,” she said.
What was of interest is that many who inquired about withdrawing their savings decided not to apply after using the tax calculators and receiving information from advisers which revealed a large personal income tax amount that they would have to pay.
“For instance, assuming certain demographics and a tax deduction comprising 39% of the amount — if the amount had to be borrowed, the loan would have carried an interest rate of 52.8% repayable over two years,” Hanekom said.
Public servants made 63,000 applications since September 1.
The Government Pension Administration Agency (GPAA), which administers pensions on behalf of the Government Employees Pension Fund, said the amounts claimed differed from person to person depending on choices and what each individual qualifies for or has in their savings pot.
However, the general trend was that most claimed for the maximum amount of R30,000, spokesperson Mack Lewele said.
“We are still in the process of submitting claims to the Sars. Suffice to say that similar to any other pension withdrawal, prior to any payment being made a tax directive is forwarded to Sars for their determination, based on the individual tax profile,” Lewele said.
However, clients who use the old version of the app and have not updated to the latest version could experience delays and challenges with accessibility. Some members cannot access the app due to incorrect login credentials that require re-registration, Lewele said.
“Bank particulars must be updated at the employer to allow for submission to the GPAA. Most of those we have received seem to claim the maximum possible.”
The National Employers’ Association of SA (Neasa) has called on employers to educate their staff on the “destructive” effect of the new law which is disguised as a “new saving grace to access funds” which are “non-credit” in nature, without proper consideration.
Instead, the association foresees that the 6% of society that would be able to retire independently without depending on Sassa pensions, would be less as the country has a poor savings rate.
“It is also doubtful that people will use these withdrawals for actual debt repayments — most are using this as a quick-fix for instant gratification of their needs and desires. According to financial data, people increasingly earn less pension due to insufficient capital, inflation and taxes, causing further poverty. This concession does not encourage healthy saving habits or preparation for financial survival during retirement, when one no longer has an active income,” Neasa said.
People are urged to consider withdrawing from retirement savings only in dire circumstances and as a last resort. A withdrawal from retirement savings robs employees of the full benefit of the compound interest, Neasa said.
“[A withdrawal] will also reduce the amount you will have available at retirement to purchase a retirement income product or take a lump sum. You will also lose the favourable tax benefit of taking a cash lump sum benefit on retirement,” the association said.
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