Massive interest in two-pot withdrawals puts administrators to the test

It’s all systems go for the two-pot system. Only four days into the implementation of the new retirement reform, feedback from South Africa’s largest retirement fund administrators has been mostly positive despite the flood of enquiries.

Alexforbes estimates that withdrawals of between R50 billion and R100 billion will be made from the savings component in the upcoming months.

“At this stage, it seems the number of withdrawals will be a lot sooner than anticipated – highlighting that individuals are financially stretched,” says John Anderson, executive of solutions and enablement at Alexforbes.

Alexforbes began receiving and processing withdrawal applications on 3 September. Anderson said they are expecting a high volume of withdrawal claims.

“To put this into perspective, we normally process around 150 000 claims in a year. However, yesterday [Wednesday] we had this same number of login requests (to access our system from where claims can be logged) in 25 minutes.

“We will be in a position to provide more detailed information by the end of the month – but at this stage the number of requests is higher than we initially anticipated.”

At Alexforbes, withdrawal applications can be lodged via AF Connect. On AF Connect, individuals will be able to see the amounts allocated between their vested and savings components – at the end of the month, their retirement components will also start accumulating.

Alexforbes also offers a calculator on MyMoneyMatters, which individuals can use to estimate the initial balance in their savings pot as of 1 September, along with the estimated tax impact and the effect of taking the withdrawal on their retirement income.

Their process involves submitting all tax directive applications in bulk daily. Anderson says Alexforbes is working through all the directives to ensure accuracy but cannot yet comment on turnaround times.

“However, given the exceptionally high volume of claims, as well as the fact that the introduction of the two-pot system is a significant change in the industry and our operating environment, we anticipate initially that the processing timeframe is up to 20 working days from the full completion of each withdrawal application.”

He adds that they will review the turnaround times over time.

“But in the meantime, we are requesting all members to please be patient while we work through the processing of their claims, as the whole system is very new to the industry.”

In preparation for the two-pot system, Alexforbes increased their capacity in their call centres, provided support for members in their branches, ensured all staff were trained, and set up a dedicated two-pot project team.

Despite extensive preparation and testing, Anderson says the demand has exceeded expectations.

“As a result of these high volumes, some technical difficulties have been experienced. This is causing delays for online withdrawal submissions. Our IT specialists are continuously working to improve the client experience.”

He reminds retirement fund members that they can make a claim at any time during the tax year, but only once per tax year.

“In addition, we strongly advise members to think carefully before withdrawing and that this is an absolute last resort – given the implications of taking cash on their pension income,” says Anderson.

Sanlam

Sanlam confirmed that large numbers of clients have asked about withdrawals since the implementation of the system.

It said the high volume of enquiries via its web platforms and call centres was causing congestion, but its systems were still operational.

By midday on 3 September, Sanlam’s WhatsApp line recorded over 84 000 messages, compared to the usual 18 000. On 2 September, the Sanlam Life and Savings call centre handled 15 000 calls, up from an average of 4 500. The Sanlam Corporate client call centre received over 5 500 calls and processed an equal number of two-pot withdrawal requests from 2 September to 5pm on 3 September.

Sanlam also deployed additional resources to prepare for the implementation.

“While this has helped, the incoming volume of engagement remains high. Early-stage challenges linked to large-scale implementation of this nature is not unusual, and our teams are working around the clock to refine and bolster our capacity to support clients,” Sanlam states.

To support clients, Sanlam’s website offers several tools, including a calculator, to enable better understanding of the impact of withdrawal on their retirement investment.

Sanlam clarifies that, unlike transactional withdrawals, the two-pot withdrawal process is tied to long-term retirement provisions, which affects the turnaround time for payout expectations.

“Apart from information requirements from the administrator to action a client withdrawal request, the process also requires interaction with, among others, the Receiver of Revenue. Legislative and tax requirements for two-pot withdrawals also include the submission of a tax reference number and confirmation of banking details,” Sanlam explains.

Sanlam encourages those who are considering withdrawals to engage financial advisers for advice. “Finally, we urge clients to consider the impact of early withdrawals on their retirement proceeds. This could be significant as they may lose out on many years of compounded returns.”

Old Mutual

On Monday, Old Mutual saw 93 000 people engaging with its WhatsApp channel and thousands of calls to its call centre. Statistics show more than 4 500 calls and 93 000 WhatsApp interactions on the first day alone. Old Mutual notes that its WhatsApp platform is equipped to handle more than 600 000 applications.

Old Mutual has urged retirement fund members looking to withdraw from their savings component to ensure their personal details are up to date. Speaking on eNCA yesterday, Michelle Acton, retirement reform executive at Old Mutual, stated: “If your fund administrators haven’t been in touch, it’s likely they don’t have your correct information.”

She underscored the importance of updating details such as cellphone numbers and identity numbers to avoid delays in accessing funds.

Acton also encouraged members to familiarise themselves with the new system, reassuring them that their money remains invested even if they do not withdraw immediately. She also noted that members should be aware that their withdrawal will be taxed at their marginal rate.

Momentum

Momentum says it’s still too early to draw definitive conclusions or identify trends.

“We’re closely monitoring the initial data and customer feedback, but a fuller picture will only emerge over time as more members engage with us,” Momentum states.

According to Momentum, although it is difficult accurately to predict volumes, the number of requests for savings component withdrawals are lower than expected – less than 1% of its in-force retirement contracts.

Momentum Retirement Administrators processed 4 291 withdrawal requests on Monday and Tuesday. By Wednesday evening, FundsAtWork had received 5 275 withdrawal requests, while Momentum Investo handled 1 089 submissions. As of 11am on Wednesday, Metropolitan recorded 6 080 eligible requests. Meanwhile, Momentum Wealth saw 234 tax simulations, resulting in 112 client withdrawal requests.

Momentum states it proactively communicated its process to clients before the launch of the two-pot system.

“We have received calls and emails from clients, and we are guiding these clients either to their financial advisers to assist them or guiding them to our online functionality Although our engagement hubs are extremely busy with enquiries, this was expected,” Momentum says.

Momentum’s system is fully integrated with the South African Revenue Service (SARS), and it is receiving tax directives. Several payments have already been processed, although Momentum said the speed of payments will vary.

“It depends on many things, such as volumes we receive, whether people are in good standing with SARS, or whether their forms are completed accurately. Depending on the circumstances per case, it can take anything between two and 20 days.”

Boost for the fiscus

Withdrawals from the savings component, which trigger an accelerated tax event, will generate additional income for SARS this year and in the years to come.

According to Daily Maverick, by Monday night, SARS had received 2 759 tax directives. By Tuesday morning, 2 424 of these directives had been processed, with requests totalling R103 million in retirement fund withdrawals and R6.7m in tax payments delivered to the fiscus.

In an interview with eNCA’s Heidi Giokos on Sunday, SARS Commissioner Edward Kieswetter said the additional tax revenue would have a positive impact.

“And secondly, there’s a knock-on effect, or a multiplier effect, because you now have additional discretionary spending income,” he said.

If the money is spent on VATable transactions, it could also lead to an increase in consumption taxes.

However, Kieswetter urged caution, hoping that those who withdraw do so for important reasons.

“I would really hope that those who do withdraw will do so for a worthy cause, like paying for education or emergency healthcare, and not for a luxury holiday or other discretionary expenditures,” he added.