News24 | Two years of two-pot: 80% have cashed out

Since the government introduced its two-pot retirement system two years ago on September 1 2024, members’ withdrawal patterns are becoming more distinct.

Retirement funds now have a clearer picture of which members cash in their savings pots and the reasons behind their withdrawals.

A third of your monthly retirement fund contribution flows into your “savings pot” and is accessible once each tax year – from the beginning of March to the end of the following February. You don’t have to withdraw it and if you do you can choose the amount as long as it is more than the minimum R2 000. You pay tax on the withdrawal at your marginal tax rate.

From their most recent statistics, the large fund administrators are seeing broad trends: a majority of members are making withdrawals; these members tend to be concentrated in the lower- to middle-income bands and in their 30s and mostly use the money to cover basic living expenses.

Present needs are more pressing than future saving

It also appears that many members realise that by withdrawing the money they harm their future retirement outcomes, but do it anyway, because they believe their present needs take priority over future needs.

Members earning the highest incomes are least likely to touch their savings pots, while the very lowest earners struggle to accumulate the R2 000 minimum needed to withdraw.

Administrators have seen three claims spikes so far: in September 2024, when the system was implemented; and in March 2025 and March 2026, at the beginning of each tax year.

Only a fifth keeps savings intact

Old Mutual Corporate’s administration data covering around 800 000 employer-sponsored fund members found that only 21 percent of members eligible to claim had preserved the money in their savings pots.

A further 41 percent were classified as “contingency withdrawers” and 38 percent as “serial claimers”, meaning they had made repeated withdrawals. The average claim was for R11 000, and 75 percent of members selected “withdraw all” in the savings pot when given the option.

Claims have been made across every age, income and gender, with Millennials making up a significant portion of repeat claimers.

More lower earners raid the pot

Discovery Corporate and Employee Benefits has seen high withdrawals among lower-income members: 58 percent of members earning less than R125 000 a year have cashed in at least once, according to statistics shared by Guy Chennells, the chief commercial officer at the recent Institute of Retirement Funds Africa (IRFA) conference in Cape Town. Discovery’s statistics also show withdrawals are made mostly by members in their 30s (56 percent).

It is important, when looking at age-related statistics, to remember that retirement funds naturally contain more middle-aged people than younger or older people, Vickie Lange, head of research, best practice and academy at Alexforbes, says. Their data reveals high withdrawal rates (70 percent) of members aged between 30 and 50 years, and Lange says this is representative of the age profile of members as most retirement fund members are in this age category.

Elaborating on “serial claimers”, Lange says Alexforbes’s data shows that many members are making repeated use of the savings pot across successive tax years, as follows:

• 67 percent of members who claimed in the 2025 tax year submitted another claim in 2026;
• 38 percent of members who claimed in the 2026 tax year submitted an additional claim in the first month of the 2027 tax year; and
• 31 percent of members who claimed in the 2025 tax year made withdrawals in all three tax years, as at 31 March 2026.

Nashalin Portrag, head of Momentum Corporate’s umbrella fund FundsAtWork, sees similar patterns.

“Momentum’s data shows that among members who qualify to withdraw – which accounts for 87 percent of surveyed respondents – 52 percent have done so,” he says.

“The data also shows a gap between what people intend to do and what actually happens. In 2025, 74 percent of members said they would only access their savings component in a real emergency. By 2026, however, only 48 percent of eligible members had not made a withdrawal. That’s a 26 percent gap between good intentions and financial reality.”

Why are members cashing in?

Among people making withdrawals from their savings pots, their reasons for doing so have remained fairly consistent: their immediate day-to-day financial needs trump their future needs, and a withdrawal, even after a substantial amount has been deducted for tax, can alleviate financial pressure.

Momentum’s data shows that 44 percent of withdrawals go toward paying off debt, 23 percent to cover everyday living expenses, and 20 percent toward education.

Among the 35 350 Old Mutual members surveyed after making a withdrawal, the largest share of withdrawals is attributed to basic living needs (34 percent), followed by emergencies (26 percent) and debt repayment (26 percent).

At Discovery, 34 percent of withdrawals were for home, car and living expenses, 22 percent for education, and 20 percent to cover short-term debt.

Savings needed to stay afloat

Portrag explains: “Before the system launched, many expected a more even split between paying off debt and building savings. Instead, rising interest rates, inflation, and existing debt repayments have pushed people toward using their two-pot savings simply to stay afloat. For the established middle class in particular, salary increases are not keeping up with debt and rising costs. Once other options such as credit cards, loans, and family support run out, retirement savings become the last resort.”

Old Mutual’s survey supports these observations. “At the time of withdrawal, 45 percent of members reported being under significant financial pressure, indicating difficulty meeting their financial obligations, while a further 34 percent were financially constrained. More than half of members (56 percent) reported that their withdrawal decision was urgent and necessary, citing immediate financial pressures and a lack of viable alternatives,” the report says.

Mental ill-health

At the IRFA conference, Chennells addressed another factor in the mix. Comparing savings-pot withdrawal data and health data from Discovery Vitality showed a correlation between financial wellbeing and mental wellbeing.

“Vitality data tells us that people who show higher stress levels are four times more likely to make poor financial decisions, and people who are in financial distress are two-and-a-half times more likely to report symptoms of depression, anxiety and sleep issues.

“When we overlay savings-pot data, we see that the withdrawal rates of people who are at high mental-health risk are 1.7 times the withdrawal rates of those with a low mental-health risk,” Chennells said, arguing that this crucial dimension has been overlooked.

How savings post withdrawals affect your retirement

Although the two-pot system is enabling us to save more for retirement, if you are withdrawing from your savings pot, you should still be concerned about whether you are saving enough, Discovery’s Guy Chennells, said in his IRFA presentation.

Chennells considered how outcomes differed for a hypothetical employee − let’s call them Sam – contributing seven percent of their remuneration from age 30 to age 65:

Before the two-pot system: If Sam had cashed in their entire savings each time they changed jobs (once at age 36 and again at age 41), they would have ended up with a net replacement ratio (NRR), or the percentage of take-home final salary they could expect as a pension, of just 16 percent at age 65. If Sam’s final payslip was for a take-home pay of R30 000 after deductions, they would have to live on R4 800 a month in retirement.

Withdrawing each year: Under the new system, by cashing in their savings pot each year, Sam would end up with an NRR of 39 percent. While more than double the pre-two-pot scenario, this nonetheless results in a fairly bleak outcome: Sam’s monthly pension would have risen to almost R12 000.

Never withdrawing: If Sam resists the temptation to take the cash each year, with their contributions compounding over 35 years, they will reach an NRR of 51 percent at age 65 providing a pension of R15 300 a month.

Upping contribution rate: In addition to preserving the full amount in their savings pot, Sam needs to increase their contribution rate to be ensured of a comfortable retirement. By upping their contributions to 12.5 percent of remuneration over 35 years, Sam will reach an NRR of 75 percent (or R22 500 from a final net monthly salary of R30 000), which the industry considers sufficient to maintain one’s living standard into retirement.

This article was first published on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (Asisa).

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