When South Africa’s Two-Pot Retirement System was implemented, the focus was firmly on functionality: rollouts, readiness, communication, education, digital adoption, volumes, and tax processing to cope with the anticipated volumes. But what if the story is about more than just the stats?

Beneath the numbers lies something more human: a behavioural shift that is rewriting the script on how South Africans engage with their finances, savings, and futures. And while the system is new, the early signals are powerful – revealing deep financial stress and lack of financial literacy. These insights are proving to be a call to employers and a potential leap forward in retirement outcomes. 

The data can be distilled into the following six key member-behaviour insights: 

When the system was introduced, industry expectations were for a staggered pattern of withdrawals: some in September, a lull, then a spike around “Janu-worry”, followed by another tax-related spike in March. But that’s not what happened.

“We didn’t see the behaviours we were expecting,” says Michelle Acton, Chief Customer Officer at Old Mutual Corporate. “Those who could, dived in right away – and they did so across all income levels, fund values, and ages. We had savings-pot withdrawals from people who earn more than R140 000 a month. This means they were being taxed at 45% on the portion they pulled out, yet they still withdrew it.”

Many members didn’t hesitate to withdraw, suggesting that South Africans are struggling to make ends meet – and when financial distress is high, urgency trumps strategy. “Financial stress drives behaviour more than long-term planning considerations,” says Blessing Utete, Managing Executive of Old Mutual Corporate. “It doesn’t matter how much you earn – all that goes out the window if you’re taking financial strain.” 

Would a salary increase solve our problems? Not according to Acton, who places a stronger emphasis on the pressing need for financial education and the importance of putting systems in place to make it easier for South Africans to save. “If you give someone a salary increase this week, there’s a strong possibility that they will have spent it in two weeks’ time and will then be back in the same financial position,” she explains. “In general, policy and legislation need to put the right guardrails in place so that people can't make fundamental decisions that may lead to financial ruin. The fact that the Two-Pot system has introduced some restrictions – including the two-thirds being – is actually much better for people in the long run.”

Over the past year, three distinct member personas have emerged, based on their claiming behaviour: 

• The preservers: people who view retirement funds as untouchable and have opted out of withdrawals entirely. 
• The serial claimers: a group for whom access equals action. If there is something to take, they will take it, every time.
• The contingency withdrawers: members who use Two-Pot withdrawals only in genuine emergencies, treating the fund like a personal safety net. 

These personas offer critical insights for designing policy, tools, and communication going forward. “The serial claimers are not using their savings pot as an emergency vehicle and will always find reasons to claim when they can,” says Acton. “Forty-eight percent of those who could claim, did. But, by contrast, those who didn’t access their savings have a shock absorber to help them with the possible financial trauma of one or two months of rent, a new fridge, or a medical emergency – and that’s something they didn’t have before.”

3. People want to pay off debt, but it’s more complex than it seems.

As shown in the graph above, 45% of members cited “to pay off debt” as their main reason for withdrawal, but bank data has not recorded a significant reduction in debt since the Two-Pot system was implemented. This suggests an ecosystem of informal debt: loan sharks, family loans, unpaid bills, and laybys. For many members, debt is not a credit card or vehicle finance; it is utility bills, clothing on account, or the R1 000 borrowed from a relative or friend last month. 

“When respondents refer to debt, they don’t seem to be referring to vehicle or bond repayments,” says Utete. “Many South Africans probably don’t have access to formal avenues to access credit, which would be better-priced credit, so they are forced to access high-interest, punitive debt facilities. Again, this underscores the financial stress that people are under.”

Another interesting – and surprising – finding was this: October 2024 recorded the highest level of second-hand car sales since 2012. “The only thing that the statisticians can attribute it to is the Two-Pot system,” says Acton. “We think Two-Pot withdrawals have actually enabled people to put down deposits on second-hand vehicles that they would otherwise have been unable to afford, which is actually a good thing for a lot of people.”

Both Acton and Utete can’t help wondering whether or not South Africans are, in fact, paying off as much debt as they claim to be. “People may be saying they will pay off debt because they think it is the responsible thing to say, or they might have the intention to settle debts, but end up using the money for something else. We’ll need to do further digging to get a better understanding of what’s going on,” says Acton.

4. We’re less likely to withdraw money we choose to save.

According to Acton, members with retail retirement annuities (RAs) were significantly less likely to withdraw than those in occupational funds. Why? Because retail fund members actively opted into their savings – often via a financial adviser – which adds a level of intention, guidance, and understanding. 

“We know, and studies have shown, that if you don't make saving for retirement compulsory, very few people do it voluntarily. It’s just a mindset thing,” says Acton. “Around the world, the countries with the highest levels of coverage are not the countries with the sexiest, most attractive retirement funds; they are the countries where guardrails are in place to ensure that people join a fund and put something into it.”

In contrast, occupational funds are compulsory, and when savings are not viewed as a personal choice, the emotional and psychological connection weakens. Acton explains: “If I voluntarily sign up for a retirement annuity and put money into it every month, I’m less likely to access that money. Why would I set up a debit order into an RA and withdraw it again at the end of the month?”

This highlights the power of advice and behavioural framing: people who feel in control of their money are more likely to preserve it.

5. Financial literacy is foundational.

One of the starkest insights highlighted by Acton and Utete is that many members had no idea how much money they had – or how tax would affect their withdrawal.

“Two-Pot flooded the market with retirement fund education, but there’s such a shortfall of it,” says Acton. “We assume people understand retirement funds because they are in them, but that is not the case. Many people do not understand their pay, how much is in their fund, or even their marginal tax rate – and many were not able to access their Two-Pot money because they had too little and were not aware.” 

The lesson? Financial literacy is not a luxury; it is a necessity – one without which members are navigating complex financial systems blindfolded. “Two-Pot turned the industry on its head in terms of engagement,” says Utete. “The ability to engage with people from a digital perspective really changed the game, and now it is a question of how we leverage that in the future. How do we use the kind of engagement that people have now, because they will be looking at it every year. This presents us with a massive opportunity to educate and talk to people about financial wellbeing and what they need to do.” 

According to Utete, financially savvy members are less likely to withdraw from their savings than those with lower financial literacy – even when the latter earn higher incomes. “Whether you look at it from the retail and occupational funds or from an adviser-based pool of members, it is still clear that the people who are getting quality advice and direction are generally the ones making the right decisions.”

6. South Africans need support, and employers play a key role.

“It is absolutely critical for employers to be part of the solution when it comes to education and financial literacy,” says Acton. “It is not something an administrator or retirement fund can do on their own – and that is the benefit of an employer getting involved, because they know their employees and their nature.” 

Simply raising salaries is not the answer, says Acton, as the underlying mindset will remain the same - as will employees’ financial struggles. Business leaders need to support their employees by providing financial education, access to advice, emergency savings tools, debt counselling, and clear, targeted communication. Increasing financial literacy is key to fostering a savings mindset and, ultimately, improving retirement outcomes. 

“As an employer, you need to be thinking about the holistic wellness of your employees, and about how you can structure your employer value proposition (EVP) to allow for some interventions around managing debt and financial wellness,” Acton says. “The fact that we have incredibly high dependency ratios exacerbates the situation, as does the country’s high unemployment rate. On average, every working person is supporting 10 people, so we have only six million tax-paying people in this country supporting a population of 65 million. The numbers don’t gel, and that also adds pressure.”

Compounding the problem is a growing culture of flash materialism, paired with a widespread habit of spending beyond our means. “We don’t have a savings culture as a country,” says Utete. “That’s why even people who should not be financially stressed are under pressure.” 

Utete explains that it doesn’t take much to tip someone into financial distress: “A R10 000 shock – something like needing a new fridge – can push someone over the edge. That’s not the kind of money most people have saved.”

The road ahead: how Two-Pot will reshape South Africa’s retirement landscape

Two-Pot may have launched with a bang, but its deeper impact is only beginning to emerge. What was once a simple “cash or preserve” decision has become a set of three choices, one for the vested pot, one for the savings pot, and one for the retirement pot. “We’ve gone from a world where you ticked one box and cashed out to a world where exiting employees suddenly have three separate decisions to make,” explains Acton. “This shift has exposed a critical support gap, as members struggle to understand their options and navigate the system.”

Even amidst this confusion, something remarkable is happening: preservation rates are rising. “Historically, people didn’t even know they had the option to preserve,” says Acton. “Now that they’re being asked and it is becoming easier, more are saying, ‘Oh, can I preserve it all? Great, then I will’.” 

That said, many members don’t qualify to withdraw due to low balances, revealing how little some contribute, especially those earning lower incomes. 

With members moving jobs more frequently, fragmentation is also a growing concern. “We’ve kicked off this compulsory preservation, which means that members are now going to have pockets of money in different funds as they work and change jobs. There’s an element of individual consolidation we need to drive as an industry. If we, as administrators, want to put the member forward - and the saver forward - we have to do whatever it takes to ensure that members can go onto the system and get a full picture of their retirement savings across the space.” 

Another positive outcome is the increased engagement by clients, as they check the value of their savings more often. “This allows us to provide them with relevant information at the right time to help them make better financial decisions,” says Acton.

Looking ahead, both Acton and Utete are optimistic. The successful implementation shows what can be done when policy-makers, regulators, and industry stakeholders collaborate. The advent of a retirement pot means members no longer have full access to their savings – and this form of compulsory preservation is sure to stand them in good stead, says Utete. Old Mutual’s initial projections suggest that member retirement outcomes could improve two- to three-fold over the next 30 to 40 years. But with preservation rates already outpacing expectations, and growing opportunities to educate and engage members, that improvement could come sooner - and be even more significant. If the momentum holds, the Two-Pot system won’t just change how South Africans save; it could fundamentally reshape the country’s future.

*This article originally appeared in the 2025 Old Mutual Mindspace Thought Leaders Forum special issue. To read more and subscribe, click here.