The Two-Pot System Trends

Experts Suggest a Less Volatile Money Market Strategy

- Liesl Peyper

A different investment approach may be required for retirement fund members' savings pots under the two-pot retirement system, especially for individuals who make regular withdrawals.

An important discussion that needs to happen is whether members should have an alternative approach when it comes to savings pots, says Rob Southey, head of asset consulting at Momentum Corporate.

"While most funds currently maintain a single, long-term strategy for both the savings and retirement pots, this may not be suitable for members who intend to make regular withdrawals from their savings pot. For them, a less volatile, money-market-type investment strategy might be more appropriate."

He cautions that the complexity and limited administrative capacity among some large fund administrators have slowed this conversation.

A year into the two-pot system, fund administrators are reflecting on what has worked, what still needs adjustment and the early withdrawal patterns emerging from the data.

Approximately R60 billion has been withdrawn since the system came into effect.

Two-pot trends

According to Southey, early trends show withdrawals are being used largely for debt repayment, education and deposits on second-hand vehicles.

"Initial concerns about widespread, frivolous withdrawals haven't materialised to the extent that many expected," he notes.