Two-Pot System: Lower-Income Members Lead Retirement Withdrawals

Two years after the South African government introduced the two-pot retirement system on September 1, 2024, large fund administrators report that withdrawal patterns have become distinct across income bands and ages as present financial pressures consistently outweigh long-term savings goals.

Retirement Fund Administrators Track Withdrawal Spikes and Demographics

Under the two-pot retirement framework, a third of every monthly retirement fund contribution flows into an accessible savings pot. Members can withdraw from this pot once each tax year, running from the beginning of March to the end of the following February, with a minimum withdrawal threshold of R2,000 taxed at their marginal tax rate. Administrators have recorded three distinct claims spikes since the system’s launch: in September 2024 at implementation, and in March 2025 and March 2026 at the start of each tax year.

Old Mutual Corporate administration data covering around 800,000 employer-sponsored fund members shows that only 21 percent of eligible members have kept their savings pots intact. A further 41 percent are classified as contingency withdrawers, while 38 percent are serial claimers who have made repeated withdrawals, with an average claim of R11,000. When given the option, 75 percent of members select to withdraw the full available amount in their savings pot.

Discovery Corporate and Employee Benefits reports heavy participation among lower-income earners. Guy Chennells, the chief commercial officer, stated at the Institute of Retirement Funds Africa conference in Cape Town that 58 percent of members earning less than R125,000 a year have cashed in at least once. Discovery statistics also indicate that 56 percent of withdrawals are made by members in their 30s.

Vickie Lange, head of research, best practice and academy at Alexforbes, notes that retirement funds naturally contain more middle-aged individuals. Alexforbes data reveals a 70 percent withdrawal rate among members aged 30 to 50 years, which reflects the demographic profile of the funds.

Lange also details the persistence of serial claimers, noting that 67 percent of members who claimed in the 2025 tax year submitted another claim in 2026. Furthermore, 38 percent of members who claimed in 2026 submitted an additional claim in the first month of the 2027 tax year, and 31 percent of 2025 claimants made withdrawals across all three tax years as of March 31, 2026.

Members Withdraw Retirement Savings Despite Initial Intent

Nashalin Portrag, head of Momentum Corporate’s umbrella fund FundsAtWork, points to a widening gap between financial intent and reality among fund members. Momentum’s data shows that among members who qualify to withdraw – which accounts for 87 percent of surveyed respondents – 52 percent have done so, Portrag said. The data also shows a gap between what people intend to do and what actually happens. In 2025, 74 percent of members said they would only access their savings component in a real emergency. By 2026, however, only 48 percent of eligible members had not made a withdrawal. That’s a 26 percent gap between good intentions and financial reality.

Fund administrators find that members generally recognize that cashing out harms their future retirement outcomes, but prioritize immediate survival. Momentum data shows that 44 percent of withdrawals are directed toward paying off debt, 23 percent cover everyday living expenses, and 20 percent go toward education.

Similarly, among 35,350 Old Mutual members surveyed after completing a withdrawal, basic living needs accounted for 34 percent of claims. Emergencies and debt repayment each accounted for 26 percent of withdrawals in the Old Mutual survey group.

High Earners and Lowest Earners Remain Outside the Cash-Out Trend

Withdrawal behavior divides sharply at the opposite ends of the income spectrum. Members earning the highest incomes are least likely to touch their savings pots. At the other extreme, the very lowest earners struggle to accumulate even the R2,000 minimum balance required to execute a withdrawal.

Millennials make up a significant portion of repeat claimers. At the same time, claims have been made across every age, income and gender, though lower-income bands and workers in their 30s form the core volume of active claimants.