The Financial Sector Conduct Authority (FSCA) has estimated that the rollout of the two-pot retirement system, which took effect on September 1, has already incurred a cost of R1.63 billion.
Furthermore, the FSCA anticipates that the implementation costs will rise by an additional R300 million each year.
These expenses encompass the hiring of additional staff, enhanced communication efforts, and the establishment of new call centres to support the system.
According to the financial sector authority, nearly 2 million withdrawals were made from retirement funds, with the majority coming from members aged 31 to 51.
Approximately 75% of withdrawals were made by individuals in this age group, with over 40% of those coming from people in their 30s. Less than 15% of withdrawals were made by members over 50, suggesting that older members may be more focused on securing their retirement.
This trend is not surprising, given that many individuals in their 30s and 40s are dealing with financial pressures such as raising children, paying mortgages, and supporting elderly parents.
The added expense of educating children can often take precedence over long-term retirement savings.
Over 65% of the withdrawals were made by individuals with annual salaries ranging from R60,000 to R240,000. A quarter of the withdrawals came from those earning between R15,000 and R20,000 per month, while a similar proportion had monthly salaries between R5,000 and R10,000.
These figures align with data from the South African Revenue Service (SARS), which shows that the majority of registered taxpayers earn less than R250,000 per year. As a result, it is expected that most withdrawals would come from people in these income brackets.
On the other hand, individuals with salaries exceeding R600,000 annually accounted for less than 3% of withdrawals, despite making up 12% of taxpayers. This indicates that higher-income earners were less likely to dip into their retirement funds due to relatively lower financial strain.
The total value of withdrawals has exceeded R35 billion. Nearly 45% of withdrawals were made by members with fund balances ranging from R100,000 to R400,000, with 27% of withdrawals coming from members with balances between R100,000 and R250,000.
Only 7% of withdrawals came from individuals with fund balances over R1 million. It's important to note that fewer members fall into this high-balance category, with the average retirement fund credit sitting at R327,000, according to financial advisory firm NMG Benefits.
The distribution of withdrawals across different annual pensionable salary categories is as follows:
Below R59,988: 4.63%
R60,000 to R119,988: 25.05%
R120,000 to R179,988: 15.67%
R180,000 to R239,988: 25.82%
R240,000 to R359,988: 13.83%
R360,000 to R599,988: 12.4%
R600,000 to R959,988: 1.77%
R960,000 and above: 0.83%
The FSCA has reported that the implementation of the two-pot system has been largely successful, with the majority of withdrawals processed smoothly.
However, there were some challenges related to system capacity due to the high volume of requests, including issues with website access, payment delays, and banking system difficulties.
Delays also occurred when members provided incorrect tax numbers or when fund administrators failed to transfer seeding capital.
Of the 877 registered funds, 853 requested rule amendments, and 837 of those requests have been completed. Eleven are still awaiting responses, while five are under further analysis.
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