JOHANNESBURG, Oct 11 (Reuters) – South Africa’s tax service said on Friday that 21.4 billion rand ($1.2 billion) had been paid out in the six weeks since a reform took effect allowing people to make partial withdrawals from their pension funds before retirement.

The “two-pot” pension policy reform is meant to support long-term retirement savings while offering flexibility to help fund members in financial distress.

It is expected to spur domestic demand and economic growth in the final months of 2024.

On Sept. 11, 10 days after the reform, the South African Revenue Service (SARS) said individuals had asked to withdraw 4.1 billion rand from their pensions.

On Friday SARS said it had received roughly 1.2 million savings withdrawal applications, up from 160,000 withdrawal applications over Sept. 1 to 10.

From Sept. 1 retirement contributions have been split into a savings component and a retirement component. A ratio of one-third of total contributions go into the savings component and two-thirds into the retirement component.

The savings component will be accessible at any time, but withdrawals must be a minimum of 2,000 rand and only one withdrawal may be made in a tax year. What is withdrawn will be taxed at the individual’s marginal tax rate, helping to boost the government’s tax take.

The central bank estimates withdrawals could be between 40 billion rand and 100 billion rand in the fourth quarter.

($1 = 17.4060 rand)

(Reporting by Tannur Anders: Editing by Alexander Winning and Ros Russell)