Two-pot retirement system: Sanlam receives 66 000 claims for R1.3 billion

Three weeks after the implementation of the two-pot retirement system Sanlam says it received 66 000 claims so far valued at R1.3 billion as mostly middle-aged, middle-income pension fund members dip into their retirement savings.

As South Africans continue to familiarise themselves with the new two-pot retirement system, Sanlam Corporate says it has seen strong trends among its members opting to withdraw their funds.

The goal of the system is to help members balance short-term financial needs with long-term retirement security and it allows members to access a portion of their retirement savings while leaving the rest preserved for the future.

Anna Siwiak, head of product development for the Sanlam Umbrella Solutions, says the middle-income middle-age group often balances the dual pressures of immediate financial responsibilities and future planning and seems to be leveraging the two-pot system for short-term relief.

“However, it is crucial to understand the long-term implications of their choices, as tapping into these savings now can impact their retirement outcomes. We know that South Africans are struggling financially given the current economic climate.”

The 2024 Sanlam Benchmark report shows that the proportion of members withdrawing all or part of their savings on resignation increased from 53% in 2022 to 72% in 2024, with 54% of these members using the funds to cover living expenses and reduce or settle debt.

Of the more than 60 000 Sars tax submissions processed to date, Sars issued over 6 000 IT88 restrictions where members have outstanding tax issues and a little over 600 members received zero payments.

“Although the withdrawal claims process is multi-faceted due to the legislative and tax steps involved, we remain committed to processing requests as swiftly as possible once all required client information is submitted and a client’s tax directive is received from the Receiver of Revenue. Sanlam Corporate aims for a 10-day turnaround time to process the two-pot withdrawal applications.”

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Siwiak says Sanlam Corporate processes on average 7 000 to 8 000 retirement, withdrawal, or retrenchment claims per month. “Our latest operational statistics reflect significant progress in claims handling, savings claims payments and Sars tax submissions.

Sanlam Corporate so far successfully processed and paid more than 57 000 claims into members’ bank accounts. The average claim amount remained steady at R20 000.

“Although the majority of claims are processed through our digital platforms, we received just under 900 claims requiring manual interventions. Sanlam decided to manually intervene and investigate further where bank accounts were opened within three months of the claim, as historically fraud cases have involved new bank accounts.”

Sanlam’s data also shows a higher percentage of males (56%) withdrawing compared to females (44%), with the 35-44 age group representing the highest percentage of withdrawers. In addition, salary band data indicates that members earning between R15 000 and R40 000 per month are the most frequent withdrawers.

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Myths and misconceptions about the two-pot retirement system

Meanwhile, Sanlam gained deeper insight into the most common misconceptions and common questions from pension fund members about the two-pot retirement system.

Roxanne Tobias, actuary and head of marketing and communications at Sanlam Risk and Savings, says the two-pot retirement system presents a significant shift in how South Africans can access their retirement savings.

“While it offers more flexibility, it is also crucial to guide clients to understand the risks and nuances of this new system so that they can make informed decisions about their retirement funds without compromising their long-term financial security.”

She says the five common misconceptions about the two-pot retirement system are that you receive an instant payment, that you can withdraw R30 000 of your retirement savings regardless of the amount in your savings pot, that you will be able to withdraw R30 000 every year, that you will lose the money if you do not withdraw it now and that it is not taxable.

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Myth 1: Receiving instant payment

Tobias says many South Africans believed they would receive an immediate payout after applying for a withdrawal, with some expecting automatic payments without needing to apply for a withdrawal.

However, she says, two-pot retirement system withdrawal applications are multi-faceted and cannot be compared with transactional withdrawals from a financial institution like a bank.

“South African retirement and tax legislation present strict processes that must be followed to ensure compliance when an individual wants to withdraw funds from retirement savings and this, typically, takes more time to process in reality. “

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Myth 2: You can withdraw R30 000, regardless of what is available in your savings pot

Another misconception is the belief that everyone with a retirement fund has access to or will receive R30 000, regardless of the amount of savings available in their savings pot.

Tobias says when the two-pot retirement system went live at the beginning of September, the savings and retirement pots were added to the retirement vehicle of every retirement fund member, and both pots had balance of zero.

“The savings pot balance received a once-off ‘boost’, commonly referred to as seeding, from the money in the vested pot of existing retirement savings. This boost amount was calculated as 10% of the balance in the vested pot but subject to a maximum of R30 000.

“The exact amount available to each member to withdraw is calculated based on how much each individual fund member has available in their savings pot. There is therefore no guarantee of access to an amount of R30 000.”

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Myth 3: You’ll be able to withdraw R30 000 every year

There is an assumption that individuals will be able to withdraw R30 000 annually from their savings component which is not the case, Tobias says. 

“In any given tax year an individual will have access to one withdrawal to the value of what is available in their savings pot at the time. Every time that you withdraw from your savings pot, the balance is reduced with the amount that you withdrew.”

The value of your savings pot at any point in time will equal the initial once-off seeding amount plus one third of all contributions from 1 September 2024 onwards and the investment growth on it, less any previous withdrawals.

For someone that contributes R3 000 per month to their retirement fund, only R1 000 will go to their savings pot monthly. This means that over a 12-month period the balance of the savings pot will increase with R12 000 due to these contributions ignoring growth on the existing balance in the savings pot.

If for this member the balance of their savings pot was zero at the start of this 12-month period, it means that after 12 months there will only be R12 000 available to this member to withdraw the following year.

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Myth 4: If you do not withdraw what is available to you, you will lose the money

Tobias says there seems to be fear amongst some South Africans that they will forfeit the money which they do not withdraw from their savings pot or that it will disappear in some way.

“On the contrary, any funds that have not been accessed remain in your savings pot (component), and the investment will continue to grow. The accessible portion is yours to manage, but there is no disadvantage to leaving it untouched. Keeping your savings invested, means that you benefit from compound interest, boosting your retirement fund over time.”

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Myth 5: Taxes will not affect your withdrawal

Tobias says a key step in the savings pot withdrawal process is the tax directive application, which dictates how Sars will tax your savings pot withdrawal amount. The withdrawal amount will be taxed at your current tax rate, which will depend on your total taxable income in the tax year, including the withdrawal from the savings pot.