Cost of two-pot pension withdrawal vs home loan to fund emergencies.

Cost of two-pot pension withdrawal vs home loan to fund emergencies.

A lot of the focus has been on how much you will be able to withdraw and how often, how much tax you will pay and how it will all work practically.

However, a more pressing point that many are missing is the ultimate effect any withdrawals will have on your retirement savings.

Although it has widely been reported that it will affect your retirement, seeing the actual numbers is far more impactful.

Jaya Leibowitz, manager of retail legal at Allan Gray, points out that any withdrawals you make are included in your gross income for that year, which means it could push you into a higher tax bracket. She provided the following example:

Sally is a 35-year-old full-time employee with a taxable income of R370,000. Based on the 2024/25 income tax table, her tax liability will amount to R59,997 (R42,678 + 26% of the amount above R237,100 – primary rebate of R17,235).

If Sally decides to access a savings withdrawal benefit of R25,000, she will be pushed into a higher tax bracket and will be liable for tax of R67,722 (R77,362 + 31% of the amount above R370,500 – primary rebate of R17,235).

Pieter Koekemoer, head of personal investments at Coronation, says every R1 you withdraw early at the age of 35 could equate to as much as R30 at retirement 30 years.

Read more in Daily Maverick: Pension Funds Amendment Bill – what’s cooking with the two-pot retirement reform?