Since the launch of the two-pot retirement system on September 1, 2024, South Africans have gained a new way to balance long-term retirement planning with short-term financial flexibility. But while the system was designed to improve retirement outcomes, early data shows that many people are using it to meet immediate financial needs, often at the expense of their future retirement security.
Explanation of three pots
as Brett Ladouce, pension fund lawyer and author pension for palukasExplained: “It's not free money.”
The system now consists of three distinct components:
- contained vessel: All savings accumulated before September 1, 2024. Members can also use it when they retire or change jobs.
- savings bank: Receives one third of the new contribution. Members can make withdrawals from this pot once per year, provided the amount exceeds R2,000.
- retirement eligible: Two-thirds of new contributions are received. This pot remains locked until retirement and must be used to purchase a living annuity.
Ladouce cautioned that withdrawals from the savings pot reduce the total amount available for retirement, and reminded members that the purpose of the retirement pot is to provide a monthly income after you stop working. “Remember, the purpose of saving for retirement is to give you an annual income that will replace that income for you when you can't work,” he said.
what are people using it for
Reports suggest that the withdrawals are being used mainly to manage debts and household expenses.
- ASI Financial (2026): Over R20 billion has been withdrawn since the system launched. Of the claims submitted, 5% were first-time users, 33% were second-time users, and 62% were third-time evacuees. Most claimants requested 100% of their available savings pot, suggesting that once members start, they often continue annually.
- Momentum Corporate Report (2025): Nearly R60 billion withdrawn in first year. Most of the withdrawals were used for loan payments, medical emergencies, school fees and funeral costs.
- Old Mutual survey (2026): found that 79% of members used withdrawals to repay loans, with many indicating they would do so again in the future.
The data highlights that, while the savings pot was meant for emergencies, many households are relying on it to cope with ongoing financial pressures.
Taxes and Fees: Hidden Costs
Withdrawals from the savings pot are taxed at the member's marginal rate, which can significantly reduce the amount received. As Vicki Lang, head of best practice at AlexForbes, explained: “Waiting for retirement means that the retirement tax tables apply and the first R550,000 is tax free.”
Lang also said fees vary by administrator and members should ensure they are fair and transparent. “There is no right or wrong way to apply fees. The important thing is that fees are fair, transparent, equitable and ensure that quality governance services are provided on a secure and sustainable basis,” he said.
In cases of divorce or legal judgments, access to savings may be restricted to ensure the availability of funds to satisfy court judgments.
When it makes sense to withdraw
Ladouce advises that a savings pot should only be used for emergencies, such as an unexpected hospitalization. However, he acknowledged that it might be wise to use it to pay off high-interest debt, provided members redirect those monthly payments into retirement savings.
long term effects
Lang estimated that the new system could improve retirement outcomes for new members by 2 to 2.5 times, but only if they keep their retirement pot safe. “This change is important because the main reason members are not able to afford to retire is that only one in 10 members protects their retirement savings when changing jobs,” she says.
personal Finance