Take a R30,000 withdrawal from your savings pot and you might expect R30,000 to land in your account. What actually arrives is closer to R20,000. Sometimes less. That gap is the tax SARS collects on your withdrawal, and understanding how much tax does SARS take from two pot system before you submit a claim could save you from a very unpleasant surprise.
Since the two pot system went live on 1 September 2024, millions of South Africans have accessed their savings pots for the first time. Many were blindsided by the tax deduction. Some received far less than they expected. Others did not realise that the withdrawal would affect their annual tax return. This article explains exactly how SARS taxes savings pot withdrawals, how your marginal tax rate determines what you keep, and what the numbers look like across different income levels.
Why SARS Treats Your Withdrawal as Income
The starting point is this: SARS does not apply a special flat rate to two pot withdrawals. Your withdrawal is added to your gross income for the tax year and taxed as ordinary income. That means it is taxed at your marginal rate, the highest rate that applies to your total earnings for the year.
This approach is consistent with how SARS has always treated early retirement fund withdrawals. The Revenue Laws Amendment Act, which gave legal form to the two pot system, maintained the principle that pre-retirement access to retirement savings should carry a tax cost. The savings pot is the one exception to the general rule that retirement funds are locked away, but that access comes at a price.
In practice, what most fund members find is that the tax deduction feels larger than expected because they apply their standard monthly withholding rate (PAYE) to the withdrawal in their heads. That is not how it works. The withdrawal is treated as a lump-sum addition to your annual income, and your fund administrator is required to withhold tax at your marginal rate before paying out. SARS then reconciles the full picture when you file your annual return.
How the 2025/26 Tax Brackets Affect What You Keep
South Africa uses a progressive tax system. The more you earn, the higher your marginal rate. For the 2025/26 tax year, the brackets are:
| Taxable Income | Marginal Rate |
| R1 to R237,100 | 18% |
| R237,101 to R370,500 | 26% |
| R370,501 to R512,800 | 31% |
| R512,801 to R673,000 | 36% |
| R673,001 to R857,900 | 39% |
| R857,901 to R1,817,000 | 41% |
| Above R1,817,000 | 45% |
These figures represent your taxable income, which is your total gross earnings minus qualifying deductions like retirement fund contributions. When SARS calculates how much tax to take from the two pot system withdrawal, it adds the withdrawal amount to your taxable income and applies the rate of the bracket your total income reaches.
Say your annual taxable income from your salary is R280,000 and you withdraw R30,000 from your savings pot. SARS treats your taxable income as R310,000 for that year. You were previously in the 26% bracket. The additional R30,000 is taxed at 31% because it pushes your income into the next bracket. Your net payout from that R30,000 withdrawal is approximately R20,700 after tax, and your fund administrator deducts a processing fee of typically R300 to R500 on top of that, so you actually receive somewhere between R20,200 and R20,400.
Worked Examples: What Different Earners Actually Receive
These examples use 2025/26 tax rates and assume a R500 fund administration fee.
Example 1: A government teacher earning R240,000 per year Taxable income before withdrawal: R240,000 (already in the 26% bracket). She withdraws R20,000 from her GEPF savings pot. Her taxable income rises to R260,000, which stays in the 26% bracket. SARS withholds R5,200. After the R500 fee, she receives R14,300. She gets 71.5 cents for every rand she withdrew.
Example 2: A mid-level manager at a Johannesburg firm earning R480,000 per year He is already in the 36% bracket. He withdraws R50,000 from his savings pot held through Old Mutual. SARS withholds R18,000. After the R500 fee, he receives R31,500. He gets 63 cents for every rand he withdrew.
Example 3: A retail worker earning R120,000 per year She is in the 18% bracket. She withdraws R10,000. SARS withholds R1,800. After the R500 fee, she receives R7,700. She gets 77 cents for every rand. Lower earners always keep more of each rand withdrawn, though the absolute amounts are smaller.
These examples make clear why understanding how much tax does SARS take from two pot system before you withdraw is not optional. The higher your income, the more the tax cost eats into the value of accessing your savings pot.
The Misconception About Special Retirement Fund Tax Rates
A very common mistake is confusing savings pot withdrawals with the special retirement fund lump-sum tax tables that apply at retirement. Many South Africans know that when you retire and take part of your retirement pot as a cash lump sum, the first R550,000 is tax-free and the next R220,000 is taxed at 18%. They assume savings pot withdrawals work the same way.
They do not. Those favourable lump-sum rates apply only to retirement withdrawals, not to pre-retirement savings pot withdrawals. The Revenue Laws Amendment Act is explicit on this point. Pre-retirement access through the savings pot does not qualify for the stepped retirement table. Your withdrawal goes straight onto your income tax assessment.
In practice, what this means is that a R30,000 savings pot withdrawal for a middle-income earner carries a higher effective tax rate than a R30,000 retirement lump sum from the same fund would. This is intentional. National Treasury designed it this way to preserve the tax incentive for leaving money invested until retirement.
How Your Fund Administrator Handles the Tax Withholding
When you apply for a savings pot withdrawal through funds administered by providers like Sanlam, Momentum, Discovery, or Allan Gray, the process works like this: your fund administrator calculates the estimated tax on your withdrawal based on your marginal rate, deducts that amount, pays SARS directly via a tax directive, and transfers the net amount to your bank account.
The tax directive process is critical. Your fund administrator requests a directive from SARS before paying out. SARS issues a directive specifying the exact withholding rate. This is why withdrawals typically take five to ten business days to process rather than happening immediately. Standard Bank, ABSA, FNB, Capitec, and Nedbank all require that the tax directive be in place before the funds clear in your account.
At the end of the tax year, SARS reconciles the withholding against your actual income. If your marginal rate was correctly applied, you owe nothing extra. If your income was lower than estimated (say, you were retrenched later in the year), SARS may owe you a refund. If your income was higher than expected (year-end bonus, commission), you may owe SARS additional tax.
What You Can Do to Reduce the Tax Cost
There is no way to avoid tax on a savings pot withdrawal entirely. The tax treatment is set by law. But a few approaches can reduce the impact.
Timing your withdrawal in a lower-income year can reduce your effective rate. If you know you will take unpaid leave, move to part-time work, or receive lower commission in a particular tax year, withdrawing during that year means your marginal rate may be lower. This requires forward planning but can make a material difference.
Some fund members also consider the interaction between their withdrawal and their retirement annuity contributions. Contributions to a retirement annuity (RA) are tax-deductible up to 27.5% of taxable income, subject to a maximum of R350,000 per year. If you increase your RA contributions in the same year you make a savings pot withdrawal, the deduction partially offsets the additional income. Providers like Old Mutual, Sanlam, and Allan Gray can show you how this plays out for your specific situation.
None of this changes how much tax does SARS take from two pot system in the base case. What it does is give you some ability to manage the timing and the offset, if your financial situation allows.
Frequently Asked Questions
How much tax does SARS take from a two pot withdrawal?
SARS taxes your savings pot withdrawal at your marginal income tax rate for the year. This is the rate that applies to your highest band of income. For most middle-income South Africans, this sits between 26% and 36%. Your fund administrator withholds the tax before paying you and sends it to SARS via a tax directive.
Does my savings pot withdrawal affect my annual tax return?
Yes. Your fund administrator reports the withdrawal to SARS, and it appears on your IRP5 at year-end. You must include it in your annual tax return. If too little tax was withheld, you may owe SARS the balance. If too much was withheld, you may receive a refund.
Is there a tax-free portion on a two pot withdrawal?
No. The R550,000 tax-free threshold applies only to retirement lump sums taken at or after retirement. Pre-retirement savings pot withdrawals do not qualify for this threshold. Every rand you withdraw is taxed as ordinary income.
Can I withdraw from the savings pot and avoid tax by keeping the amount small?
No. Even small withdrawals are taxed at your marginal rate. The minimum withdrawal is R2,000, and SARS applies the same income-addition rule regardless of the withdrawal size. There is no de minimis threshold below which two pot withdrawals are tax-exempt.
Read more: How to calculate tax on two pot system
Before you submit a withdrawal application to your fund administrator, calculate your marginal rate using SARS’s online tools at sars.gov.za, or ask your employer’s HR department what your effective rate has been for the current tax year. Factor in the administration fee your fund charges, and work out the net amount you will actually receive. If the after-tax figure does not solve your financial problem, consider whether a short-term loan or budget adjustment could be a better option. The tax cost is real, permanent, and not recoverable once the withdrawal is processed.
If you are weighing whether to withdraw at all, understanding the full long-term cost goes beyond the immediate tax hit. Read our breakdown of the disadvantages of withdrawing from the two pot system before you decide.
This article is for informational purposes only and does not constitute financial advice. Tax rules and fund regulations may change. Speak to a registered financial advisor or visit sars.gov.za for guidance specific to your situation.
