Positive updates on the two-pot retirement system for South African axpats

Although the scheme has been available since September 1, 2024, limited information is available to help South African expats understand the two-pot retirement system. South African residents have been eschewing retirement planning advice and withdrawing billions from their savings ‘pot’ already. However, what about two-pot retirement for South African expats who have divested from the country, are living overseas and have parked their retirement for a rainy day?

TWO-POT RETIREMENT FOR SOUTH AFRICAN EXPATS

To not be negatively impacted, specialists from Tax Consulting SA say the timing must be just right for any withdrawal from two-pot retirement for South African expats, reports IOL. The good news, however, is that there is a golden window to access retirement funding for South African expats who’ve left the country.

Nevertheless, a lack of guidance on two-pot retirement for South African expats could be because: “Local financial advisors hope to continue earning a healthy return on investment for as long as the funds remain put,” says Tax Consulting SA. So, what’s at stake should expats wish to consider making a withdrawal from the scheme? Here are three things to consider …

1. EXCHANGE RATES

Depending on where you’re now based, two-pot retirement for South African expats is all about the exchange rate you’ll get. At the moment, the rand/dollar exchange rate is at its best levels in a year. If the market is in your favour at the time of withdrawal you stand to make a lot of money, says Tax Consulting SA.

2. LOCK-IN RULE

South African expats are permitted to make one withdrawal from their savings ‘pot’ per tax year – 1 March and 28 February. As for the three-year lock-in rule – which came into effect in March 2021 – non-tax residents cannot withdraw money from their preservation fund for three consecutive years. However, there is a legal process to back-date your financial emigration, but it is not an easy process through SARS, explains Tax Consulting SA.

3. SARS TAX COMPLIANCE

Another thing to remember is that making a withdrawal from two-pot retirement for South African expats will trigger a compliance check. This is to ensure that your employer has been contributing to your retirement fund. This occurs because the Financial Sector Conduct Authority (FSCA) found recently that thousands of employers have not been making retirement fund contributions for expat employees.

As a result, any non-compliance in the eyes of SARS will lead to a hefty penalty deduction from the withdrawal amount.