Two-pot retirement system: More billions rolling into consumers’ pockets

More billions are rolling into consumers’ pockets under the two-pot retirement system and looking at the profile of the average person who withdraws funds from the savings pot shows that middle-income consumers are still under financial pressure.

The two-pot retirement system was implemented on 1 September last year and gives pension fund members access to a portion of their retirement savings once per financial year for emergencies. Since implementation, pension fund managers have been inundated with claims.

According to pension fund manager Alexforbes, projections indicate that retirement outcomes could improve by 2 to 2.5 times for new members under this system that allows access to a portion of members’ retirement savings for financial needs while preserving the rest for retirement.

Data from a comprehensive Alex Forbes survey of more than 8 200 responses and data analysis covering more than one million members showed that 348 000 claims were submitted to Alexforbes by 30 November 2024, amounting to more than R6.5 billion.

Approximately 65% of these claims were submitted in September, and over 97% of savings pot claims under the two-pot retirement system were processed by 30 November, with an average processing time of eight working days. By 30 January, the number of claims increased to more than 370 000, with a total value exceeding R7 billion.

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High volume of two-pot retirement system claims shows immediate financial needs

Vickie Lange, head of best practice at Alexforbes, says the high volume of claims highlights the immediate financial needs of members and reinforces the importance of effective digital platforms and administrative capabilities.

The data shows that 76% of claims were from members aged between 31 and 51, highlighting the significant financial responsibilities in this age group. The financial vulnerability of the claimants was clear from the fact that 59% of the claims were from members with fund credits under R250 000, while 94% were from members earning less than R550 000 per year.

Lange says this demonstrates that financial needs often outweigh the benefits of preserving savings for retirement.

Claims under the two-pot retirement system came from all sectors, with 24% from the wholesale and retail trade, 10% from mining, 9% from manufacturing, 2% from professional and business services and 2% to 8% from other sectors.

Alexforbes had over 550 000 views and 1.8 million interactions on its My Money Matters toolkit and more than 4 million logins to AF Connect, the member portal, as well as 20 000 participants in webinars and 259 000 calls and emails managed by its call centres.

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More than half of Alexforbes members applied to withdraw under two-pot retirement system

The survey also found that 54% of respondents accessed their savings pot, while 46% did not, indicating informed decision-making. Lange says this suggests growing trust in the two-pot retirement system as a tool to balance retirement savings with immediate financial needs.

There was also little claiming remorse, as 86% of claimants were satisfied with their decision, indicating that the two-pot retirement system is meeting the expectations of most members, while 96% of respondents understood the long-term impact of withdrawals and tax implications.

As pension fund members can claim once per year every financial year under the two-pot retirement system, members who already claimed can claim again from 1 March when the new financial year starts.

The survey shows that 47% of members plan to claim in the future, with 34% of previous claimants intending to claim again. Among those who did not make an initial claim, 33% do not plan to claim, while 13% are considering it.

ALSO READ: Two-pot retirement system: survey shows what withdrawals will be used for

Withdrawals used for debt and living expenses

How members will use the money they claim also shows the financial stress people experience, with 80% of claimants using their withdrawals for debt repayment and essential living expenses. Of these, 50% repaid debt, while 30% covered essential costs.

Other uses included major purchases (13%), financial investments, home improvements, medical bills, education and vehicle maintenance (7%). Lange says these findings indicate that members are prioritising financial stability when accessing their savings.

“Given this trend, debt solutions and rewards programmes could provide additional value to members, helping them better manage their finances while preserving long-term savings.”

Lange says the two-pot retirement system has proven to be a crucial financial resource, enabling members to manage financial challenges while preserving most of their retirement savings.

ALSO READ: Two-pot retirement system: People taken aback by amount of tax – survey

Discovery’s two-pot retirement system payouts

While Discovery did not want to say how much was paid out under the two-pot retirement system, Guy Chennells, chief commercial officer at Discovery Corporate and Employee Benefits, says the highest amount paid out to a single member was R41 962.49 before tax was deducted, while the lowest amount paid out to a single member was R2 000, the minimum amount that could be claimed.

97% of all applications requesting withdrawals under the two-pot retirement system were successful, and 98% of members were paid out within five days. Only those members with specific issues that needed to be resolved with their bank or the South African Revenue Service (Sars) took longer.

According to Discovery’s data, withdrawal rates increase materially as individuals’ income reduce, with a 4% withdrawal rate among high-income members compared to a 38% withdrawal rate from the lower income members. 

Chennells says it is important to note that people of all ages have been withdrawing at similar rates, and Discovery did not note any specific age band that is withdrawing more than other age bands. “The only exception is that our members above the age of 55 where withdrawal rates were about half that of other age bands.”

What are claimants using the money for? Chennells says Discovery’s data indicates that withdrawals were taken primarily to settle debt or for housing and education costs.