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Retirement Savings - Pot - Withdrawals & Retirement
By: Ilse de Klerk
Withdrawal and Retirement relating to Tax
After receiving information from different sources, this is my understanding of the new rules
Vested pot
The 'old' rules will apply when you want to 'retire from those contracts.
Old rules - 1/3 cash with applicable SARS retirement tax table and 2/3 must be invested into income contract. Life Annuity, Living Annuity, or a combination of them.
Savings pot
Withdrawal
You have this option annually.
The minimum is R2 000 of the fund value.
SARS will deduct tax payable first and you will be taxed at your marginal tax rate.
Also, note that the withdrawal declared is part of your taxable income. These withdrawals can influence your tax rate and tax bracket.
Example:
| Fund Value | R50 000 |
| Withdrawal | R20 000 |
| Tax at "18%" - Your marginal tax rate | R3 600 |
| Product provider admin costs | R500 |
| Total paid into your bank account | R15 900 |
With every withdrawal, you will be taxed.
Retirement pot
Normal retirement rules and SARS retirement tax table would be implemented.
Retirement
The reason for this final 'out' of this contract, is retirement and not withdrawal.
The first level of the table is that R0 - R550 000 will be taxed at 0%.
A bit uncertain what will happen to the savings pot.
Info from one source, states that all the pots will be counted together and a normal retirement process will be implemented.
The other source states that retirement and vested pots will be counted together and normal retirement process will be implemented and the savings pot potion will be processed as a withdrawal and will be taxed at your marginal tax rate.
Conclusion
Please use the options for what they are intended to be.
Real emergency and retirement.