South Africa’s two-pot retirement system has seen a massive R21.4 billion withdrawn by over 1.2 million eager taxpayers. In just a few short months, it seems like many have decided to dip into their savings pot, cashing in on what they can now, rather than waiting for that distant retirement age. But, like everything in life, there’s a catch – and SARS is keeping a very close eye on things.

In case you’ve been living under a rock (or simply avoiding your tax returns, no judgement), the two-pot system was introduced on 1 September. The goal? To ease financial pressure by allowing South Africans to access part of their retirement savings before they actually retire. One-third of your savings pot is now fair game if you need it, while the rest is tucked away for your golden years.

Read more about how the two-pot retirement system works here.

But before you start planning that island getaway with your newfound cash, let’s break it down.
Since the system kicked off, a whopping R21.4 billion has already been paid out. And if you’re wondering just how many people are jumping on this bandwagon, over 1.2 million South Africans have applied to access their savings. The good news is that around 1.14 million of these applications were approved. The bad news? More than 60,000 applications were declined due to pesky things like incorrect tax or ID numbers.

SARS commissioner Edward Kieswetter has been quick to remind us that things like outstanding tax debt or dodgy tax declarations could affect your payout. If you owe the taxman money, he’ll take his cut before you see a cent. In fact, if you have an arrangement with SARS to settle your debt, they’ll make sure that’s deducted too.

Now, let’s talk tax. This is where it gets real. When you dip into your retirement pot, you’re not just withdrawing free money. Depending on your income, SARS will take a chunk – anything from 18% to 45%. So, while it may feel good to get that cash now, you’ll be sharing a good portion with Uncle SARS.

Kieswetter also issued a stern warning to those trying to game the system. Apparently, over 213,000 South Africans have been caught understating their income to get a more favourable tax rate. Yep, people are tweaking the numbers to save a bit on tax, but here’s the thing: SARS is watching, and they’re not amused. Kieswetter made it clear that this kind of behaviour “borders on criminality,” and penalties are coming for those who thought they could slip under the radar. In short – if you’ve been less than honest, expect a not-so-friendly letter from SARS soon.

So, where does this leave us? The two-pot system is a lifeline for many but comes with strings attached. Tax implications, debt deductions, and potential penalties for dodgy tax declarations make it clear that this isn’t just “free money.” But for those who need immediate financial relief, it’s a game-changer.
Ultimately, the decision to withdraw from your savings pot is a deeply personal one. Just remember – today’s quick cash could impact tomorrow’s comfortable retirement.