Two-pot retirement system: Two weeks and already a few billion rands later

Just over two weeks after the implementation of the two-pot retirement system on 1 September, pension fund administrators say they received thousands of claims from members who want to withdraw funds from their saving pots.

Administrators say they have paid out billions of rands already.

Dumo Mbethe, CEO of Momentum Corporate, says by 16 September the Momentum Group received 112 449 two-pot withdrawal applications to a cumulative value of R1.7 billion. The group already paid 81% of all withdrawal applications and this percentage is rising steadily. 

“Our ability to process and pay withdrawals from the very first business day after the two-pot retirement system was implemented demonstrates our commitment to serving our clients, making sure they receive their funds without unnecessary delays despite the challenges brought by the sheer scale of this transition and volumes of claims received.”

He says while this early engagement with the two-pot retirement system revealed much about clients’ immediate financial needs, it also provided valuable insights into broader trends across the South African retirement landscape.

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Key trend: older people in low-income groups are withdrawing funds

“One of the key trends is the age distribution of applicants. Initially, most requests came from the 40-to-49-year age group, which made up almost 40% of applications. It is worrying that individuals who are closer to retirement are withdrawing from the savings pot as they may not have enough time to make up for the shortfall.”

However, he says as the days passed, applications from the 30-to-39-year age group increased relative to the other age groups, closely reflecting the demographics of national contributors to retirement.

“Income distribution data further sheds light on the state of financial well-being among applicants. By 13 September, close to 60% of applicants indicated that they were from low-income groups, earning too little to pay personal income tax. It is interesting to note that 10% of applications were made by individuals indicating that they are at a taxable income of R500 000 and more per year.”

One positive trend was that client engagement with financial advisers picked up. According to the Momentum Unisa Financial Wellness Index 2023, only 15% of South African households are financially literate and Mbethe says this highlights the importance of providing the necessary tools and advice for clients to make informed decisions.

“These early trends suggest that while the two-pot system has provided some clients with much-needed financial relief in tough financial conditions, it has also prompted deeper conversations about retirement savings and financial security.”

ALSO READ: Two-pot retirement system: one week later

Liberty paid out millions already

According to Liberty, by 14 September Liberty Retail paid out a gross value of R21 686 070.97, while the tax paid amounted to R5 345 968.88. R411 146.25 was paid for IT88, a deduction order issued by Sars which allows it to electronically collect outstanding penalties from a taxpayer who owes Sars money for prior taxes.

The cash amount paid was R15 928 955.84 for 1 646 policies. According to Liberty, 51% of the payments were requested by women, while 51% of the requests were from the age group 40 – 49 and 27% from the age group 50 – 59.

By Tuesday this week, Liberty Corporate Benefits paid out R42,5 million in gross value, with R9,8 million going to the tax man and R700 000 going to IT88 payments. A total of R31.9 million was paid to clients for 2 730 policies. Again 51% of the payments were requested by women, while 47% of the requests were from the age group 30 – 39 and 35% from the age group 40 – 49.

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Almost half of NMG Benefits claims were from walk-ins

Siphamandla Buthelezi, head of platforms at NMG Benefits, says the company received close to 19 000 claims and successfully processed 12 237, more claims than its annual claims in volume. Out of the 19 000 claims, 10 000 were from walk-in fund members who visited one of its offices around the country to submit a withdrawal.

So far the total amount requested via claims is R378 million, which is based on 19 000 claims received, resulting in an average of R19 800 per claim. NMG already paid 1 100 claims in volumes, totalling R11 million, with the R3.6 million tax handed over to Sars.

“We expect to double the number of payments by the end of next week now that our system is more stable and all processes have been thoroughly ironed out. The claims amount paid out so far is in line with what we expected.”

NMG did not have any rejected claims, but there are pending claims due to missing requirements such as incorrect bank accounts, tax numbers and other static data.

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Old Mutual is now ready to start processing claims

Old Mutual has now also confirmed that its customers can start to submit withdrawal applications via the Old Mutual Channel on WhatsApp after Old Mutual decided to start processing claims earlier than the initial date of 23 September.

Michelle Acton, retirement reform executive at Old Mutual, says the phased approach was adopted to help ensure the system could handle the expected 600 000 withdrawal applications. During Phase 1 customers could check their personal details and savings balances via the Old Mutual channel on WhatsApp.

This gave them the time and opportunity to get their tax affairs in order before submitting a withdrawal application.

“It is critical for all our retirement fund members to check that we have their up-to-date personal details, as any mismatch between the details provided and the details on record with Old Mutual will result in a withdrawal request being declined or delayed,” Acton says.

“These measures are in place as a security precaution to prevent fraud and protect customers.”

ALSO READ: Misconceptions about the two-pot retirement system: What you need to know

No hurry: think about withdrawing under the two-pot retirement system first

She says the extensive publicity around the two-pot retirement system created a sense of urgency for many members.

“We would like to remind members that there is no rush to access your savings pot. There is no deadline. Members can apply for a single withdrawal from their savings pots at any time during every tax year, but the more money you leave in your pot and the longer you leave it, the more it will grow.”

Acton says retirement fund members must have all the necessary documents ready, including a valid ID number, bank details, annual income and tax number, to ensure smooth processing. “Members who submit a valid withdrawal application can expect processing times of up to 30 days, depending on volumes and turnaround times from Sars.”