Two-pot retirement alarm

PENSION: ANNUAL WITHDRAWALS COULD LEAVE FUND MEMBERS POOR, WARNS EXPERT

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While consumers are smiling now as they are able to use the money from the savings pot under the two-pot retirement system, experts are sounding the alarm that annual withdrawals could leave pension fund members very poor in retirement.

John Manyike, head of financial education at Old Mutual, says the number of South Africans who can retire with adequate pension has been at a staggering 6% and therefore people who withdraw funds under the two-pot retirement system are expected to be very poor when they retire.

He was speaking at the company's mid-year economic outlook presentation.

"Since the inception of the two-pot retirement system, Old Mutual saw withdrawals of a total of almost R4 billion, with fund members receiving about R2.8 billion, with withdrawals averaging R12 2000 per member," he says.

"People are not using their withdrawals from the savings pot of the two-pot retirement system to buy cars. Most of them will tell you they are withdrawing funds to pay debts. However, if you look at reports from the banks I do not think it will confirm that people are paying off their debts."