The implementation of the Two-Pot Retirement System on 1 September 2024 was one of the biggest changes to the South African retirement industry to date.

It saw a wave of excitement amongst many cash-strapped members who looked forward to financial relief, but also widespread warnings about the long-term impact of early withdrawals on the retirement savings of those who chose to withdraw.

Preparing for thousands of anticipated claims in very short time periods, Old Mutual created a digital platform for Savings Pot claims. Members could conveniently access it via WhatsApp, and it was quickly adopted by almost all claimants.

How it’s going

The Two-Pot Retirement System has provided valuable insights into the impact of early access and compulsory savings.

Looking at data from a base of 1.3 million members and policies, Old Mutual has received more than 300 000 claims to date to the value of R3.6 billion. But, while the number of claims per day peaked as high as 23 266 in September last year, it has rapidly plateaued since October and has remained at around 650 claims per day ever since.

Additionally, claims did not rise in December or January, as some had expected, despite members withdrawing money for the festive season or to deal with January’s financial pressures.

In terms of who has been claiming, the data shows that members in occupational funds through their employers have submitted significantly more claims than members in retail funds, at 50% vs. 16%. Somewhat expected, lower-income earners have claimed the most, with 85% of the occupational fund members submitting claims earning an income below R30 000 per month.

Occupational fund members not only claimed more regularly but also in higher amounts, averaging R16 000 per claim vs. R9 000 from retail fund members.

Overall, more than 75% of members selected ‘withdraw all’ when submitting a claim.

It is also worth noting that only 65-70% of fund members were eligible for withdrawals, indicating concerningly low fund savings of less than R20 000 for the 30-35% of members who did not qualify for a withdrawal.

We know that, because the system allowed for 10% of a member’s savings to be transferred – or seeded – to their Savings Pot at the implementation of the Two-Pot System, it also set the minimum withdrawal amount at R2 000.

This indicates that these members all had less than R20 000 in their retirement savings funds when the Two-Pot system was implemented.

Tallying the positives

Despite these stark insights into the number of members with very low retirement fund savings, the past six months have also shown several positives.

Thanks to easier digital processes and more involvement through claims, collecting data from members has become much easier. Members are also becoming much more interested in their savings, and tools like our Savings Pot Calculator have made it easy for them to know how much they could withdraw (and, in the process, be more attentive to how much they’ve saved so far).

Retirement funds have also now become something of an ‘in thing.’ Apart from massive media exposure during 2024, they were mentioned in the Grade 12 study notes, made it to TikTok, and were even used in a Nando’s advertisement.

From a government and regulatory perspective, SARS has coped well with the extra tax processes related to thousands of withdrawals, and the FSCA has approved new rules at lightning speed.

The retirement fund industry has also been exemplary, and there’s been a sense of collaboration from all stakeholders and industry players to make the new system happen successfully.

Of course, some challenges remain. Significant pieces of legislation, such as the Revenue Laws and Pension Funds Amendment Acts, still need to be aligned with the new system, and we still have some member data outstanding.

And while 1 September has come and gone, the transformational changes the Two-Pot system has introduced will remain. So, we need to continue to communicate, educate and help people understand the changes and new processes that are their new retirement reality.

Looking back at the first six months of Two-Pot, however, the retirement fund industry and government have coped well, leaving us with a much better retirement system in South Africa – a massive step in the right direction.

If you'd like to learn more about the Two-Pot system, use our Savings Pot calculator or find an adviser to assist you, visit our Two-Pot page.