New data suggest South Africans are less interested in drawing from their retirement savings through the new two-pot retirement system.
It's less than two weeks to go before many South Africans can take advantage of the new two-pot retirement system, but it seems that the idea has become less desirable as initially thought.
Research by Old Mutual suggested that fewer people planned to dip into their retirement savings early.
The data revealed that the number of working South Africans with a retirement saving provision (income R8,000 - R119,000) who said they were likely to withdraw their savings had dropped significantly by 10%, from 62% in 2023 to 52% in 2024.
More information and education about the system has dampened people’s need to take a slice out of their retirement savings, Vuyokazi Mabude, head of knowledge and insights at Old Mutual said.
“This indicates that South Africans are becoming more focused on securing their financial future.
“Our research shows that people have a better understanding of the importance of saving for retirement, and they are feeling more confident about their finances and making smarter decisions,” Mabude explained.
“Furthermore, broader access to financial advice has significantly boosted financial confidence, which was a key finding in this year's Monitor, leading to more informed and better money decisions.”
Old Mutual’s research also suggested that confidence in the adequacy of retirement savings affects views on the two-pot Retirement System.
“Higher confidence appears to also typically correlate with a positive perception of two-pot while working South Africans who have lower confidence in the adequacy of their retirement savings displays greater scepticism,” she added.
“Lower confidence is more common among lower-income groups and individuals younger than 50, who are also more likely to withdraw their retirement savings,” Mabude said.
The research found that only 26% of working South Africans are ‘very confident’ that they have enough savings for retirement, compared to 38% of higher-income earners (R60,000 - R119,999)
The data found that awareness of the two-pot retirement system is highest among those aged 50 and above (68%), compared to just 51% among those aged 18-29.
Lastly, the researchers found that saving for a comfortable retirement continued to be the top savings goal among employed South Africans, followed closely by saving for a rainy day and paying off debt.
It should be used for emergencies!
Mabude argued that the ability to withdraw from your retirement should allow you more flexibility, especially during emergencies.
“The new system is designed to offer greater flexibility during emergencies while safeguarding long-term savings by preventing members from withdrawing their entire balance, a practice that has proven to be the greatest destroyer of long-term value,” she explained.
How to learn more about the two pot system?
Finance expert Tiaan Herselman, the head of advice and product owner at Old Mutual Wealth: Advice Fintech has several popular TikTok videos that help explain the two pot system.
Here is a video by Herselman that explains how South Africans can withdraw from the retirement system.
@tiaanfinance Replying to @Queen how much can you draw with 2 pot? #2potsystem #retirement2pot #pension #savingspot #tiaansfinance #finance ♬ original sound - TiaanFinance
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