Those aged 35 to 44 lead the way in two-pot withdrawals – Sanlam

With more males than females opting to access their savings.

Three weeks have passed since the two-pot retirement system came into effect and thousands of pension fund members have submitted withdrawal applications to access a portion of their savings.

Both Sanlam Corporate and Momentum Group say there is a notable trend among middle-aged, middle-income individuals opting to withdraw funds.

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“Notably, our data also shows a higher percentage of males [56%)] withdrawing compared to females [44%], with the 35-44 age group representing the highest percentage of withdrawers,” says Anna Siwiak, head of product development for Sanlam Umbrella Solutions.

Sanlam’s statistics further show that members earning between R15 000 and R40 000 are the most frequent withdrawers.

Under the two-pot regime, a third of pension fund members’ retirement savings are now allocated to a savings component, and two thirds of their contributions are allocated to a retirement component.

Dumo Mbethe, CEO of Momentum Corporate, says it initially found that most requests were coming from the 40- to 49-year age group, which made up almost 40% of applications.

“It is worrying that individuals who are closer to retirement are withdrawing from the savings pot as they may not have enough time to make up for the shortfall,” he adds.

However, of late applications from the 30- to 39-year age group have increased relative to the other age groups – closely reflecting the demographics of national contributors to retirement.

Withdrawal volumes and payments

Since the launch of the two-pot system, Sanlam has received over 66 000 claims to date totalling over R1.3 billion, it notes.

More than 57 000 claims were paid out into members’ bank accounts with R20 000 as the average amount, Sanlam says.

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Outstanding tax 

Of the more than 60 000 tax submissions processed to date, the South African Revenue Service (Sars) has issued over 6 000 IT88 restrictions where members have outstanding tax issues.

Just over 600 members received zero payments.

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By Monday 16 September, Momentum had received 112 449 two-pot withdrawal applications with a cumulative value of R1.7 billion. At that point, 81% of all withdrawal applications were paid out.

A few days prior, close to 60% of Momentum applicants indicated that they were from low-income groups, earning too little to pay personal income tax.

“It is interesting to note that 10% of applications were made by individuals indicating that they are at a taxable income of R500 000 and more per year,” it says.

Pension fund members in higher income brackets will pay significantly more tax (at the marginal rate) on savings pot withdrawals than those in lower income brackets.

No cut-off time for withdrawals 

The extensive publicity around the new two-pot retirement system has created a sense of urgency for many, says Michelle Acton, retirement reform executive at Old Mutual.

“We would like to remind members that there is no rush to access your savings pot. There is no deadline,” she says.

“Members can apply for a single withdrawal from their savings pot at any time during every tax year, but the more money you leave in your pot, and the longer you leave it, the more it will grow.”

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