JOHANNESBURG (Reuters) – South Africans asked to withdraw 4.1 billion rand ($230 million) from their pension funds in the first 10 days after a reform took effect on Sept. 1 allowing fund members to make partial withdrawals before retirement, the tax service said.
The “two-pot” pension policy reform is expected to spur domestic demand in the final months of this year, boosting economic growth alongside factors like a widely expected interest rate cut later this month.
It should also lift government tax revenue.
The South African Revenue Service (SARS) said in a statement on Wednesday it had received roughly 160,000 savings withdrawal applications over Sept. 1 to 10.
“Gross amount of the lumpsums for the applications received totals 4.1 billion rand,” SARS said.
The reform is meant to support long-term retirement savings while offering flexibility to help fund members in financial distress, according to the National Treasury.
From Sept. 1, retirement contributions will be split by retirement funds into a savings component and a retirement component. A ratio of one-third of total contributions will go into the savings component and two-thirds into the retirement component.
The savings component will be accessible at any time, but withdrawals must be a minimum of 2,000 rand and only one withdrawal may be made in a tax year. What is withdrawn will be taxed at the individual’s marginal tax rate.
The central bank estimates withdrawals could be between 40 billion rand and 100 billion rand in the fourth quarter of this year.
($1 = 17.9554 rand)
(Reporting by Tannur Anders and Kopano Gumbi; Editing by Alexander Winning and Angus MacSwan)
