Navigating financial pressure: insights on South Africa's Two-Pot retirement system

South Africa’s Two-Pot retirement system, introduced in September 2024, is reshaping how workers access their retirement savings at a time when many households are under sustained financial strain, says Thys van Zyl, CEO of Everest Advisory Services.

He says by splitting contributions into two components,one preserved for retirement and another accessible under defined conditions, the system was designed to strike a balance between long-term financial security and short-term relief. In practice, however, the scale and frequency of withdrawals are painting a more complex picture of how South Africans are coping in a tough economic environment.

Since its rollout, uptake has been significant. By early 2025, more than 2.6 million withdrawal applications had been processed, with over R43 billion paid out, according to Sars.

Within the first year, total withdrawals reached approximately R57 billion across four million transactions, based on Liberty data. While this reflects strong demand for accessible savings, it also points to the financial pressure facing consumers. Complaints to the Office of the Pension Funds Adjudicator have also risen by 13% following implementation, highlighting ongoing administrative, compliance, and information alignment challenges, says Van Zyl.

He says the growing number of withdrawals and the rise in repeat withdrawals suggest that many South Africans are not only turning to their savings in emergencies, but are increasingly relying on them to manage ongoing financial pressure.

According to Van Zyl, this trend underscores both the value of the system and its potential risks.

“The two-pot system was designed to provide short-term relief, and it is clear that it is fulfilling that role. However, the scale and frequency of withdrawals point to a broader issue, many South Africans are under sustained financial pressure,” says Van Zyl.

He says the pattern of repeated withdrawals is particularly concerning.

“When individuals begin using their savings pot on a regular basis, it shifts from being an emergency measure to a financial coping mechanism. That is where the real risk lies,” he says.

Industry data shows that a significant portion of members who withdraw once return year after year, often taking the full amount available each time. This signals a shift away from once-off emergency use towards a more habitual reliance on retirement funds to meet recurring expenses.

“This behaviour has serious long-term consequences. Every withdrawal reduces the potential for compound growth, which is one of the key drivers of overall retirement savings growth. What may seem like a relatively small withdrawal today can translate into a substantial shortfall at retirement over time,” Van Zyl says.

While the system has reduced the need for workers to resign in order to access their retirement savings, it has also introduced new behavioural risks linked to ease of access, he says.

“The ease of access means that withdrawals have become quicker and simpler, which can also encourage more frequent use.”

The broader economic backdrop is compounding the situation. Rising living costs, elevated interest rates, and growing levels of debt are placing pressure on households across income groups.

“Financial pressure is no longer limited to lower-income households. We are seeing signs of strain across the spectrum, reflected in both withdrawal patterns and rising credit usage,” he says.

Van Zyl cautions that while the system provides important flexibility, it should not become a substitute for income.

“The reality is that retirement savings should not become a source of cash flow. If used incorrectly or too frequently, it can significantly undermine long-term financial security.”

He urges consumers to think carefully before accessing their funds.

“Short-term relief should not come at the expense of long-term stability. Consumers should carefully consider the implications based on their individual circumstances and consider seeking independent financial advice before making withdrawal decisions against their future retirement plans or requirements. The two-pot system is a powerful tool, but like any financial instrument, it must be used responsibly. Without proper planning, the long-term cost of short-term relief could be far greater than many realise,” says Van Zyl.

At the same time, the system’s implementation has exposed operational challenges. Accessing funds is not always straightforward, with delays and disputes often linked to incomplete or incorrect member information, says Danie Hattingh, principal officer of the Building Industry Pension Scheme.

“The Two-Pot system has provided valuable short-term relief, but only if members are properly registered and compliant. Digital access is not just about convenience; it is about strengthening the integrity of the system. When member information is accurate and systems are aligned, withdrawals are faster, more secure, and traceable. But it also places responsibility on all stakeholders to ensure their information is correct and up to date,” he says.

In response, he says, the Building Industry Bargaining Council (BIBC) has shifted to a fully digital withdrawal process for members of the Building Industry Pension Scheme. Paper-based and in-person applications have been phased out, with submissions now processed through secure online platforms that integrate tax verification and payment systems. The move is intended to reduce delays, improve accuracy, limit fraud, and ensure funds are paid out more efficiently.

“While digital access offers speed and security, it also requires members to be proactive,” continues Hattingh.

He says successful withdrawals depend on several key factors: accurate identity details that match official records, up-to-date contact information for verification, verified banking details linked to the member, and full compliance with Sars requirements, including submitted tax returns and settled liabilities.

Where these elements are missing, applications can be delayed or blocked, a source of frustration for members needing urgent financial relief. Employers also play a critical role. Accurate and timely submission of employee data, including contributions and identity details, directly affects withdrawal outcomes. Errors or delays can lead to disputes and reduced payouts, particularly in sectors such as construction, where contractor and subcontractor arrangements are common. The BIBC continues to monitor employer compliance to protect members’ retirement savings and ensure the integrity of contributions.

The shift to digital access has also created opportunities for fraud. Third-party “facilitators” offering to assist with withdrawals are increasingly targeting members, often requesting sensitive personal or banking details, he says.

Hattingh warns that “the safest approach is to use only authorised platforms and official channels. Members should never share personal details with unverified sources. Even small errors can compromise security and delay access to funds.”

He adds that while the system offers flexibility, it must be used with care.

“The system is designed to provide limited relief without undermining retirement security. Members need to use withdrawals thoughtfully, understanding both the benefits and the long-term implications,” he says.

PERSONAL FINANCE