One year in, the lessons from South Africa's two-pot retirement reform

APPROXIMATELY R60 billion has been withdrawn since South Africa’s new two-pot retirement fund system was implemented a year ago.

- ROB SOUTHEY

In a recent briefing to the National Council of Provinces, National Treasury said the introduction of the two-pot system has been largely successful, improving public engagement with retirement funds, exposing noncompliance by some employers, and ensuring better long-term retirement savings.

While the new system faces some teething issues, including some administrative hurdles, monitoring and evaluation mechanisms are being applied to ensure its effectiveness.

The Revenue Laws Amendment Bill of 2025 provides for further corrections and technical changes to the system.

This first year has offered some interesting insights into how members are responding to the new rules and what challenges still need to be addressed.

Initial concerns about widespread, frivolous withdrawals haven't materialised to the extent that many expected with data indicating that most withdrawals are being used to reduce debt, pay for education and put down deposits on second hand vehicles.

One of the most striking findings is the high rate of repeat withdraw-

als. Of those who withdrew funds when the new rules came into effect, typically more than 80% are repeat withdrawers, accessing their savings pot multiple times.

This suggests that a segment of the population is relying on these withdrawals annually, likely for ongoing financial pressures rather than one-off emergencies.

Some seem to be using the withdrawals to pay down informal debt, such as payday loans, with the debt cycle often restarting the following month.

The fact that most members are using funds for essentials suggests that the extensive communication efforts by financial institutions and the government have been effective