South Africa’s retirement system has long mirrored the country’s complex social and economic evolution. For decades, it was fragmented and marred by inequality under apartheid-era policies and employer-dominated schemes. Later, it became a platform for unions to build collective power, negotiate worker benefits, and secure greater representation. While this helped reshape the system, it also layered it with competing interests that still echo today in mistrust between stakeholders, lingering perceptions of power imbalances, and a system often struggling to put its members truly at the centre. 

Over time, the industry has undergone three major shifts: 

• from employers carrying full responsibility, along with full control, under defined benefit schemes to individuals assuming investment risk through defined contribution funds;
• from a proliferation of small, standalone schemes to the rise of umbrella funds that pooled resources for scale and governance;
• and, most recently, the beginning of a move to a growing emphasis on members themselves – their choices, their wellbeing, and their retirement outcomes. 

Each of these shifts has been driven by policy, regulation, and market forces, but the central question remains: has it brought us closer to a system that genuinely puts the member first? 

As Humphrey Mkwebu, Managing Director, Old Mutual Corporate, puts it: “The absolute reason for a retirement fund to exist is to make sure that employees have a sustainable income when they retire, and that they are protected on their journey to retirement with risk cover and protection”. So, what will it take to build a system that better delivers on this promise, transforming many fragmented parts into something truly meaningful? 

Beyond funds: consolidation as the new normal

Between the year 2000 and today, South Africa’s retirement industry has transformed dramatically. Where the number of funds stood at 15 587 at the advent of the new millennium, the FSCA’s 2023 Pensions and Statistical Report now puts that number at 4 909, of which only 29% are active. This stark reduction underscores just how far fund consolidation has progressed over the past two decades, as many employers moved into umbrella structures to pool resources and secure the governance and scale efficiencies that standalone schemes simply couldn’t sustain.

With the introduction of the Two-Pot Retirement System in 2024, the landscape is shifting again. This reform might not directly tackle member consolidation like Australia’s automated consolidation measures, but it does tackle one of South Africa’s biggest long-term challenges: weak preservation. By splitting contributions into a long-term retirement pot and a more accessible savings component, it aims to protect members’ retirement journeys from being repeatedly depleted by cash-outs.

Michelle Acton, Chief Customer Officer and Retirement Reform Executive at Old Mutual Corporate, believes the momentum for even more significant change is clear. “About 66% of the remaining retirement funds in South Africa have less than half a billion rand in assets,” she notes. “At that level, it becomes very hard to achieve the scale, governance, and cost advantages needed to truly benefit members, which means more consolidation is almost inevitable.”

An industry target of between 200 and 500 funds has been cited as the optimal range for South Africa’s retirement landscape. But history and the numbers tell a deeper story: consolidation for its own sake means little. Whether through fewer funds, stronger preservation rules, or tighter governance standards, real progress will be measured by how these shifts deliver better outcomes, build trust, and create a retirement system that truly serves its members, says Acton.

What Australia got right and why South Africa must have a tailored approach

Australia’s superannuation system is often held up as a benchmark for how consolidation, done well, can improve outcomes. From over 1 500 funds in 2004 to fewer than 100 today, it’s a story of scale driven not by sheer mergers, but by tough standards linking fund survival to costs, net returns, and transparency.

“Underperforming funds in Australia had to write directly to members and explain why they lagged,” Acton highlights. “That level of disclosure alone drove significant consolidation.”

Acton cautions against assuming a simple copy-paste scenario. South Africa’s landscape is different, shaped by historic divides, union-led structures, and stark dual economies. “The real story is who has not yet consolidated, and why,” adds Mkwebu. “It could be smaller, union-aligned funds. If we want progress, we need to understand their realities and build trust.”

That’s why consolidation in South Africa is not without controversy. Some fear that fewer, larger funds could crowd out black-owned administrators and consultants, potentially slowing transformation. Others worry about concentration risk, diluted employer voices, or bundled fees that obscure true costs.

Even if some of these fears prove unfounded, it’s only through genuine transparency that trust can be rebuilt and lingering doubts addressed. Clear, comparable disclosures would show whether or not both smaller and larger structures are delivering on their promise to better serve members. 

Australia’s experience points to powerful levers: standardised cost and net-return disclosures that compel funds to compete on real value. For South Africa, adopting similar measures could spark the right conversations and help members and employers see which funds genuinely deliver and provide the impetus for continued change.

A system built around the member

Despite decades of reform, the numbers remain sobering. The National Treasury estimates that 94% of fund members are not on track to achieve adequate retirement outcomes, and Old Mutual’s OnTrack™ data shows most employers score just a single star. More of the same will not be enough.

Mkwebu believes the industry must keep sight of the long game. Retirement funds must sustain members not just for the next few years, but across lifetimes that could stretch to 80 or more years, demanding a system built on trust, robust governance, and an unwavering focus on members’ futures.

This evolution will depend on stronger disclosures, higher minimum standards for governance and servicing, digital tools that inform and empower members, and regulatory changes that make it easier to consolidate member benefits and fund types. Only then can consolidation become a force that truly serves members, rather than an end in itself.

If policymakers, employers, and providers can align around this vision, South Africa’s retirement landscape may finally complete its journey from many to meaningful, delivering not just funds, but futures.

Transformation is key in the next wave of reform 

But while, in many cases, consolidation has improved governance and efficiencies, the question remains: is it a net positive for inclusion and transformation? According to Mkwebu, the answer depends on how we design and regulate the next wave of retirement reform. 

He acknowledges that there are valid concerns: consolidation has disproportionately benefited a few large players. A concentrated market dominated by a few players may risk stifling innovation or marginalising smaller providers, but that doesn’t mean consolidation can’t be used to deliver broader value. “That’s why transparency – on costs, net returns, trustee independence, and member outcomes – is key to building trust and enabling real competition.” 

We need to ensure that umbrella funds are held to the highest standards, and the power utilised to inclusively enable. Done well, this looks like:

1. Access to underserved employers and members

Umbrella funds give smaller employers access to institutional-grade retirement offerings, which they may not find affordable on a standalone basis.

2. Support for transformation

Well-governed umbrella funds can use their centralised scale and procurement power to actively drive transformation across the retirement industry. By including black-owned providers, ringfencing mandates for impact, and adopting inclusive procurement strategies, umbrella funds can support emerging businesses and diversify the value chain. To ensure this happens, strong accountability, transparent reporting, and inclusive governance are essential.

3. Access to greater technology at scale

• Member value add: Most of the top umbrella funds are now able to provide access to mental and financial wellbeing tools, innovative digital budgeting tools, member counselling, and healthcare services – many at discounted rates or no cost due to the scale of the funds.
• Access to data intelligence tools and systems: This may be too expensive for small funds. Data allows for robust research, benchmarking, and tailored digital and advisory solutions.

4. All of the above, together, providing a platform for broader policy goals

At scale, umbrella funds can enable:

• Auto-enrolment for SMEs – Looking ahead, umbrella funds may also provide the infrastructure required to support future reforms like auto-enrolment for SMEs, where small and medium-sized businesses can seamlessly onboard employees into a compliant, well-governed fund, without the administrative and fiduciary burdens of running a standalone scheme.
• Simplified portability – Portability of benefits across employers within the same fund avoids fragmented pots and the associated loss of value from early withdrawals or poor consolidation practices. This is particularly important for a highly mobile workforce, where people frequently move between jobs or alternate between formal and informal employment.
• Centralised retirement education platforms – Access to AI tools and digital counselling would allow funds to serve a larger proportion of the population without the resourcing constraints. 

As consolidation continues, clear disclosure standards, minimum governance thresholds, and digital tools that empower members will be essential to ensure this transformation doesn’t simply serve the largest players but delivers meaningful progress for the industry and its people. 

Consolidation for the sake of consolidation should not be the end goal. Stronger outcomes, wider access, and better retirement for all South Africans are, and must remain, the true measure of success

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