Previous and future Savings Pot withdrawals​

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Underpayment of tax on Savings Pot withdrawals that have already been paid: For Savings Pot withdrawals that have already been paid, tax was deducted based on the annual income you filled in on your Savings Pot withdrawal request. If you filled in either a nil annual income or an annual income which is lower than your actual annual income, then either no tax or too little tax was deducted and paid to SARS. This can have serious consequences for you:

• You will still have to pay the tax due to SARS, i.e. you have not escaped payment of the tax.

• The tax will be payable as part of your tax assessment at the end of the current tax year, when you may not have cash on hand to pay the tax.

• Alternatively if you have not yet paid the outstanding tax and request another Savings Pot withdrawal in the next tax year, SARS may require the Fund to deduct the outstanding tax (called an IT88 arrear tax deduction) from that payment together with the tax payable on your second Savings Pot withdrawal. This means you may receive very little, or possibly nil, cash on that withdrawal.

• SARS have communicated that they may impose a penalty on you due to "tax fraud".​

• SARS also has the right to send a garnishee order to your employer to deduct the outstanding tax from your monthly salary.

To avoid these potential consequences, you should urgently contact SARS and arrange to pay the outstanding tax. SARS have indicated that they may allow people to pay off the amount due in agreed monthly instalments.

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Tax on future Savings Pot withdrawals: SARS have indicated that for future Savings Pot withdrawals, tax will be calculated and deducted based on the higher of the annual income you provide on your Savings Pot withdrawal request and your taxable income in the previous tax year that SARS has on record. It is not clear that the SARS system is applying this correctly, so it is important that you provide a reasonable estimate of your annual income on your Savings Pot withdrawal request.

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Reconciliation at the end of the tax year: The tax paid on your Savings Pot withdrawal is an estimate based on your estimated annual income (or your annual income in the previous tax year). The actual tax payable will only be determined as part of your tax assessment at the end of the tax year, based on your actual total taxable income over the tax year. Any (hopefully small) difference in the tax payable will either be refunded to you by SARS or payable by you directly to SARS, as appropriate. ​

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Arrear tax due to SARS: A number of members have outstanding amounts of tax due to SARS in respect of previous tax years. When they apply for a Savings Pot withdrawal and the Fund then applies to SARS for a tax directive, SARS will instruct the Fund to deduct both the tax due on the withdrawal amount and the outstanding tax (called an IT88 arrear tax deduction) from the payment. Depending on the amount of outstanding tax due by the member to SARS, the member may then only receive a very small Savings Pot payment or possibly no payment at all. Please note:

• Once a tax directive is issued, it cannot be reversed, i.e. such members cannot ask the Fund or the administrator to cancel the Savings Pot withdrawal request if they are unhappy with the amount received after tax.

• The Savings Pot administration fee is also deducted from the amount paid, although no fee is deducted if the member receives a nil payment (due to the taxes payable being more than the amount of the Savings Pot withdrawal request).​​​​