SA Revenue Service: Two-pot withdrawals have hit over R35bn, applications almost at 2 million

More than R35-billion has been withdrawn since the two-pot reforms — which allow for an early drawdown on pension funds — kicked in on 1 September, the South African Revenue Service (SARS) said on Tuesday. 

“Since its inception, SARS has observed an unprecedented and steady increase in tax directive applications, likely reflecting the economic challenges faced by households,” the revenue service said in a statement. 

“As of 18 November 2024, 2,153,942 directive applications were received and a total of 1,914, 306 directives issued with a total gross value of R35,052,572,876.62.”

This means that two-pot pullouts in the fourth quarter of this year could be on pace to exceed the “moderate withdrawal scenario” plotted by the South African Reserve Bank in an August “Economic Note”. 

Read more: South African Reserve Bank Special Occasional Bulletin of Economic Notes

“This scenario assumes that people will be... prudent and only extract an additional R40-billion from their pension funds in Q4 2024,” the Reserve Bank’s note said. 

The bank’s R40-billion scenario in this case was specifically for Q4 and the two-pot system kicked in during September, the last month of Q3. So it remains to be seen how much is ultimately withdrawn in 2024. 

But the pace will probably fall short of the Reserve Bank’s “high withdrawal scenario”. 

“In this scenario we assume that in Q4 2024 people will extract an additional R100-billion from the savings portion of their pension funds (this includes seed capital and their one-third savings pot in 2024) due to the new legislation. This will be on top of the historical resignation portion of R110-billion for the whole 2024 calendar year,” the Reserve Bank said. 

Read more: Two-pot retirement

Clearly, there are a lot of South African households in need of a liquidity shot. But there does not seem to be a mad scramble for cash as outlined in the high withdrawal scenario. 

The Reserve Bank in August forecast that the moderate scenario “... will add 0.1 and 0.3 percentage points (pp) respectively to GDP (gross domestic product) growth in 2024 and 2025, while reducing the government debt to GDP ratio by 0.5 pp in 2024/25 and by 1.0 pp and by in 2025/26”.

Under the high scenario, GDP growth was seen getting a further boost of between 0.3 and 0.7 percentage points. with the debt-to-GDP ratio improving by 1.1 percentage points in 2024/25 and by 2.3 in 2025/26.

The impact on economic growth will depend in part on how much of the money is spent and how much is used to pay down debt. With Black Friday and Christmas looming, retailers are hoping that most of the cash is used for consumption.  

The Reserve Bank did not provide an update on how much revenue it has collected so far from the two-pot withdrawals, but it is seen boosting its coffers with personal income tax revenue forecast by the bank to increase by between R20-billion and R41-billion in 2024/25. 

SARS said more than 169,000 applications were declined for a range of reasons, including systems failures from the fund management entities, wrong identification numbers, wrong tax numbers and things like that. More than 41,000 directives were declined because of insufficient funds or incorrect codes. DM