The retirement funding landscape in South Africa changed fundamentally on 1 September 2024 with the implementation of the two-pot system—a long-anticipated reform that introduces greater flexibility for retirement fund members. As we look back at the first few months of its rollout, it’s clear that the system has had a significant impact—both at a personal and economic level.
Why Was the Two-Pot System Introduced?
The two-pot system was designed to balance two critical needs: long-term financial security and short-term financial relief. Under the new regime, contributions to retirement funds are split between two components:
- A Savings Pot that members can access once per year before retirement, to help meet urgent financial needs.
- A Retirement Pot that remains untouched until retirement, ensuring the preservation of retirement savings.
This shift acknowledges the financial pressure many South Africans face today. It provides a safety valve for emergencies while still encouraging disciplined retirement planning. For new members entering the system, early projections suggest it could double or even triple their retirement outcomes compared to the old system, thanks to improved savings behaviours and preserved fund portions over time.
A Surge in Claims Reflects Financial Strain
The uptake of the system has been swift and significant. By 31 January 2025, SARS had processed over 2.4 million valid applications, totalling R43.4 billion in claims. Around R11 billion of this was collected as personal income tax, with the remaining R32 billion landing in the pockets of everyday South Africans.
Most of these claims were made almost immediately after the system went live:
- 65% of claims were submitted in September 2024, with 40% arriving in the first two weeks alone.
- A large share of the claimants were aged 31 to 51, the age group typically navigating mortgages, children’s education, and rising living costs.
In fact, 59% of claims came from members with retirement savings of less than R250,000, and 94% were from individuals earning under R550,000 annually. This shows that the two-pot system has provided crucial relief for middle- to lower-income earners who may not otherwise have had a financial lifeline.
Where Did the Money Go?
The data reveals that members used their withdrawals responsibly:
- 50% of respondents used their payout to repay debt.
- 30% covered essential living expenses, including housing, groceries, and medical bills.
- Only 13% made significant purchases, such as home improvements or vehicle repairs.
This aligns with broader economic data. Despite the large volume of funds entering the market, there was no unusual spike in luxury retail spending, according to Statistics South Africa. Instead, increased sales at general retailers suggest the funds were spent on necessities.
The only standout in discretionary spending was in the used vehicle market, where registrations surged to their highest monthly total since 2012. This suggests that some members used their withdrawals as deposits for affordable transportation—likely a mix of necessity and improved access to credit.
Debt Repayment Over Consumption
Credit bureau data also paints a telling picture. There was a notable drop in overdue debt, especially in:
- Clothing accounts
- Furniture and retail accounts
- Telecommunication contracts
- Education loans
This trend supports the idea that members used their claims primarily to settle outstanding balances, rather than to fund new credit purchases. Interestingly, while arrears initially dropped across most categories, only some remained low in the following months, showing that while the withdrawals offered breathing room, ongoing financial stress may persist for many.
Member Awareness and Satisfaction
A recent survey of over 8,000 fund members shows that:
- 96% understood that their claim would reduce their retirement savings.
- The same percentage were aware of the tax implications.
- 86% of those who claimed were satisfied with their decision.
These figures highlight the success of education and engagement efforts leading up to the rollout. Members didn’t claim blindly—they made informed choices based on need and understanding.
Moreover, only 54% of members opted to claim at all. The remaining 46% chose to preserve their savings, indicating a healthy balance between meeting short-term needs and maintaining long-term financial goals.
The Role of Employers and Advisors
The success of the two-pot system so far has also been driven by effective communication channels. Most members relied on workplace resources and retirement fund providers for information and counselling. Digital toolkits, webinars, call centres, and advisory services played a central role in helping members make informed decisions.
It’s clear that members trust their employer-sponsored retirement funds and advisors more than social media or informal networks when it comes to financial decisions—an important insight for ongoing engagement.
Partnering for Better Outcomes
At The People Company, we understand the transformative potential of the two-pot system—not only for the retirement industry but for the financial wellbeing of employees across all sectors.
That’s why we partner with our clients to:
- Educate and empower employees on the implications and opportunities of the two-pot system.
- Provide strategic advice on how to manage claims, tax planning, and long-term retirement goals.
- Facilitate communication, updates, and support, ensuring that your workforce remains informed and confident in their financial decisions.
We take things personally—because your people matter.
This article has been written by our Distribution Partner; FFG Health & Employee Benefits – The People Company (Pty) Ltd. Contact [email protected] for more information.
*All data and statistics referenced in this article have been sourced from the following documents: “Two-pot claims and credit data – FINAL” (Bureau of Market Research, 2025) and “1979 – Two-pot Member Insights” (Alexforbes, 2025).