More and more cash-strapped workers are turning to retirement savings for quick financial relief while others even resign for speedy access to their savings.
A trend of repeat withdrawal has been noticed across all pension/provident fund administrators since the introduction of the two-pot retirement withdrawal system in September 2024. The system allows workers the ability to withdraw from the savings component of their retirement.
Momentum’s data shows that only 5% of claims submitted since March 1 this year are first-time withdrawals and about 33% are second withdrawals, while 62% were third withdrawals. A similar pattern is reflected across fund administrators.
“This suggests that many South Africans are starting to rely on the savings pot as part of how they manage ongoing financial pressure. The data also shows that this behaviour is more common among people between the ages of 31 and 45, as well as those earning between R90,000 and R180,000 per year,” said Therese Grobler, head of wealth management at Momentum Financial Planning.
She said long-term financial resilience is not only about having access to funds. It is shaped by the decisions people make about when to use that access and when to preserve it.
While most withdrawals are small, with amounts typically below R10,000, the data does show that two-pot withdrawals are becoming habitual. While the overall impact on total retirement assets is still relatively contained, at under 2% in some funds, the behavioural shift is becoming a cause for concern.
Here are five realities of the two-pot system to consider when making that decision.
- Distinguishing between want and need
The two-pot system was designed to reduce the need for people to resign from their jobs in order to access their retirement savings.
“But access can create its own pressure as our data shows that 71% of recent claims were for amounts under R10,000. These smaller withdrawals often go towards day-to-day expenses rather than resolving longer-term financial challenges.
“In the moment, it can be difficult to tell the difference between what feels urgent and what is essential. Taking a step back to make that distinction can help protect long-term savings,” said Grobler
- The cost is not always visible
Withdrawals from the savings pot are taxed at an individual’s marginal rate. This means that a R10,000 withdrawal may result in closer to R7,000 being received, depending on the tax bracket, said Grobler.
There is also a longer-term cost that is easy to overlook. Once funds are withdrawn, they no longer benefit from compound growth.
- Repeated withdrawals can change long-term outcomes
“One withdrawal may feel manageable but over time, repeated withdrawals can start to erode retirement savings in a meaningful way,” said Grobler.
The increase in repeat claims, Grobler said, suggests that this is becoming a pattern for many individuals, often driven by ongoing financial pressure rather than one-off events.
This highlights the importance of having other ways to manage short-term financial needs.
- Financial resilience requires structure
In a challenging economic environment, it is understandable that people look to available savings to manage immediate demands.
But long-term resilience is usually built through structure rather than reaction, said Grobler.
This includes having access to an emergency fund where possible, as well as ensuring that appropriate risk cover is in place. These measures can help reduce the need to access retirement savings when unexpected expenses arise.
Financial advice plays a role before the decision is made
One of the most important, and often overlooked, parts of the two-pot system is the role of financial advice.
The decision to withdraw is often made under pressure. Engaging with a financial adviser before making that decision can help bring clarity.
It allows individuals to understand the full impact of withdrawing, consider alternative options, and make a more informed choice based on their broader financial position.
In some cases, accessing the savings pot may still be necessary. In others, there may be ways to manage the situation without compromising long-term outcomes, said Grobler.
“In this context, access is only one part of the equation. How that access is used and the decisions that support it will ultimately shape long-term financial outcomes,” said Grobler.
