The two-pot system of retirement reform is so far achieving its objective of preserving the bulk of savings for retirement, despite the significant withdrawals that have taken place since its introduction in September 2024.
Research by Old Mutual Corporate suggests that improved preservation under the reform could increase retirement savings by two to three times over a working lifetime, potentially shifting the proportion of South Africans on track for better retirement from around 6% to closer to 20%.
The system was designed to allow withdrawals from the savings pot to assist those in financial distress and prevent them from resigning from their jobs to gain access to their entire retirement savings, while at the same time securing the preservation of funds in the retirement pot, which cannot be accessed until retirement.
By end-February 2026, R79.3bn had been approved by the South African Revenue Service for withdrawal from the savings pots, with a total of 5.6-million people applying for tax directives for their withdrawals.
Despite these withdrawals, Old Mutual Corporate said preservation has improved by a 33% since the inception of the system.
“In practical terms, that means more members are leaving their retirement money invested when they change jobs instead of cashing it out, which has historically been one of the biggest reasons South Africans arrive at retirement with too little saved,” Old Mutual Corporate chief customer officer Michelle Acton said in a statement.
“South Africa’s two-pot retirement system is starting to show that limited short-term access to savings does not have to come at the cost of long-term retirement security.
“The early evidence suggests the two-pot system is delivering on its design and that responsible flexibility can still improve retirement outcomes over time. It means members can access savings in moments of pressure while ensuring that the majority of their retirement savings remain protected and invested. The next step is to apply that same design thinking to participation and contribution levels so that more savings remain in the system over time.”
South Africa’s two-pot retirement system is starting to show that limited short-term access to savings does not have to come at the cost of long-term retirement security.
— Michelle Acton, Old Mutual Corporate chief customer officer
Acton notes that the number of Old Mutual SuperFund members preserving their retirement savings has doubled since the reform’s implementation. This improvement has come even as withdrawal activity has returned to inception-level volumes, with about 80% of eligible members having accessed their savings pot at least once and a significant proportion making repeat withdrawals.
“This improvement does not mean the underlying financial pressure has eased. If anything, the withdrawal data shows why structured access remains necessary,” she said.
An Old Mutual Corporate survey demonstrated that withdrawals are being driven by financial necessity rather than discretionary spending. Claims are primarily used for basic living expenses (34%), debt repayment (26%) and emergencies (26%), with spending concentrated on essentials such as food, rent, electricity and transport.
“Liquidity pressure is real and for many South Africans access to savings is not optional,” Acton noted. “What matters is that this access is now structured. Members are no longer required to resign or withdraw everything to meet short-term needs on exit from employment and that is where the reform is starting to make a measurable difference.”
Acton cautions, however, that better preservation alone will not solve the country’s retirement adequacy problem. Preserving savings means keeping existing money invested for longer. Adequacy, by contrast, is about whether people are saving enough in the first place to retire with sufficient income.
“Preserving what you have keeps more money invested,” said Acton. “But adequacy depends on how much is contributed and whether people remain in the system over time.”
“If participation remains quasi-voluntary and default contribution rates stay low, undersaving becomes embedded,” she said. “We know which levers move outcomes. The question is whether we are prepared to use them.”
Acton argues that the experience of two-pot reform strengthens the case for further structural reform. “If system design can influence behaviour at exit it can influence behaviour at entry,” she said.
“Automatic enrolment and calibrated contribution defaults are the next logical step. The opportunity now is to strengthen the system so that more savings remain invested for longer.”
The National Treasury has indicated that it plans to open discussions later this year on possibly allowing access to the retirement pot of savings in cases of dire financial distress. Such a move would be of concern to the retirement industry, which wants to retain the preservation of funds for retirement, but it is strongly supported by Cosatu.
The two-pot retirement system splits retirement fund contributions into a savings pot (one third) and a retirement pot (two thirds), with a vested pot consisting of funds accumulated before the introduction of the system on September 1 2024. The vested pot is governed by the pre-existing rules of the fund.
Under the system, one withdrawal can be made per tax year (minimum amount R2,000) up to the full existing balance, the withdrawal being subject to tax at the marginal rate.