{
  "id": 16152834,
  "title": "Two-pot retirement withdrawals: Understand the tax and long-term cost",
  "url": "https://urgent.news/2026/10/23/two-pot-retirement-withdrawals-understand-the-tax-and-long-term-cost",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-10-23T04:00:00.000Z",
  "source": {
    "name": "IOL",
    "slug": "iol",
    "url": "https://iol.co.za/the-star/opinion/2026-10-23-two-pot-retirement-withdrawals-understand-the-tax-and-long-term-cost/"
  },
  "original_language": "en",
  "account": "The two-pot retirement system allows South Africans to access part of their retirement savings in times of financial hardship. However, many members are surprised to discover that the amount received is significantly less than what they requested. Over 2 million taxpayers had withdrawn R43.4 billion gross from their Savings Components by January 2025, according to SARS. These withdrawals can be used to service debt or meet household costs, but they should not become an annual financial crutch. SARS taxes the withdrawals as income at the member’s marginal rate, and administrators may also charge fees, resulting in a payout that may be lower than the requested amount.\n\nTo avoid financial strain, the FSCA recommends members estimate their net payout using the SARS Two-Pot retirement system calculator before applying for a withdrawal. Consider Sophie, who requested R30,000 to cover unexpected hospital expenses. She only received R18,700 after SARS deducted R10,800 at her 36% marginal tax rate and her administrator charged an additional R500 in fees. Withdrawals from the Savings Component can reduce future investment growth, as the member's contributions and the employer's are divided among three components. Early access can impact the growth potential of the remaining funds, which could accumulate over time.\n\nFor instance, if R10,000 stayed invested at a 7% annual growth rate, it could grow to R19,672 in 10 years, R38,697 in 20 years, or R76,123 over 30 years by age 65. However, the withdrawal will cost more than the cash taken today due to the taxes, fees, and lost investment growth. While the Two-Pot system provides controlled access to a portion of retirement savings, it is not a substitute for an emergency savings fund. Members should consider building separate emergency savings to cover unexpected expenses without dipping into their retirement funds.\n\nThe Financial Sector Conduct Authority (FSCA) regularly publishes lists of employers reported for failing to pay over retirement contributions deducted from employees’ salaries. On July 2, 2026, the FSCA released a list of 6,064 employers owing an estimated R8.33 billion in unpaid retirement contributions, affecting approximately 590,000 fund members. Failing to comply with Section 13A of the Pension Funds Act can constitute an offence, putting employees’ retirement savings and financial security at risk. Before applying for a withdrawal, members should assess their need, explore alternative options, and understand the tax, fees, and potential lost investment growth. By prioritizing building and replenishing emergency savings, members can protect their future financial independence.",
  "summary": "Two-pot withdrawals may help during financial emergencies, but tax, administration fees and lost investment growth can significantly reduce the long-term value of your retirement savings.",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}