South Africans withdrew 4.1 billion rand ($230 million) from their pension funds within the first 10 days of a new reform implemented on Sept. 1, allowing members to make partial withdrawals before retirement, the tax authority reported.
The “two-pot” pension policy reform is anticipated to boost domestic demand and economic growth in the year’s final months, aided by a potential interest rate cut.
The reform is also expected to increase government tax revenue. SARS revealed it had received around 160,000 withdrawal applications from Sept. 1 to 10, with a total withdrawal sum of 4.1 billion rand.
The policy aims to promote long-term savings while providing flexibility for those in financial hardship, as per the National Treasury.
Starting Sept. 1, pension contributions will be divided into two parts: a savings portion and a retirement portion.
One-third of contributions will go to the savings portion, which can be accessed at any time, while the remaining two-thirds will go to the retirement portion.
Withdrawals from the savings portion must be at least 2,000 rand, and only one withdrawal is allowed per tax year, subject to taxation at the individual’s marginal tax rate.
The central bank projects that withdrawals could range from 40 billion rand to 100 billion rand in the fourth quarter of this year.
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