Discover how South Africa's two-pot retirement system has led to a 33% increase in the preservation of retirement savings, despite ongoing financial pressures. Learn about the implications for future reforms and the importance of structured access to savings.
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South Africa’s Two-Pot retirement reform is beginning to deliver one of its core promises: giving workers controlled access to part of their retirement savings without derailing long-term preservation, says Michelle Acton, chief customer officer at Old Mutual Corporate.
Acton says new data from Old Mutual Corporate shows preservation rates have improved by 33% since the Two-Pot retirement system came into effect in September 2024, suggesting more South Africans are leaving their retirement savings invested when changing jobs rather than cashing out entirely.
The reform, introduced to balance financial flexibility with retirement security, allows retirement fund members limited access to a savings component while preserving the remainder for retirement.
According to Old Mutual Corporate, the number of members in the Old Mutual SuperFund preserving their retirement savings has doubled since the system was implemented.
“The early evidence suggests the Two-Pot system is delivering on its design and that responsible flexibility can still improve retirement outcomes over time.
"It means members can access savings in moments of pressure, while ensuring that the majority of their retirement savings remains protected and invested. The next step is to apply that same design thinking to participation and contribution levels, so that more savings remain in the system over time,” says Acton.
The improvement in preservation comes despite sustained demand for withdrawals, underlining the severe financial pressure many households remain under, she says.
Old Mutual Corporate says around 80% of eligible members have accessed their savings pot at least once, with a notable share making repeat withdrawals, levels broadly in line with those seen when the system was first introduced.
“This improvement does not mean the underlying financial pressure has eased. If anything, the withdrawal data shows why structured access remains necessary,” says Acton.
Survey data from the insurer indicates that most withdrawals are being used for necessity rather than discretionary spending. Basic living expenses account for 34% of claims, while debt repayment and emergencies each make up 26%.
Much of the withdrawn money is reportedly being spent on essentials such as food, rent, electricity, and transport.
“Liquidity pressure is real, and for many South Africans, access to savings is not optional. What matters is that this access is now structured. Members are no longer required to resign or withdraw everything to meet short-term needs on exit from employment, and that is where the reform is starting to make a measurable difference,” says Acton.
The findings align with broader concerns around household financial strain in South Africa. Data from the South African Reserve Bank and consumer credit agencies have repeatedly shown elevated indebtedness and constrained disposable income among households, with many consumers relying on credit or savings to cover day-to-day expenses.
However, Old Mutual cautions that improved preservation should not be confused with retirement adequacy.
While keeping savings invested for longer can materially improve eventual retirement outcomes, the company notes that preservation alone will not solve the country’s retirement crisis if workers are not contributing enough in the first place, says Acton.
According to Acton, historically, most South Africans withdrew the bulk of their retirement savings when leaving employment, a pattern widely blamed for poor retirement readiness. Old Mutual Corporate estimates that stronger preservation under the Two-Pot system could increase retirement savings by two to three times over a person’s working life, potentially raising the proportion of South Africans on track for retirement from roughly 6% to around 20%.
“Preserving what you have keeps more money invested. But adequacy depends on how much is contributed and whether people remain in the system over time.
“If participation remains quasi voluntary and default contribution rates stay low, under-saving becomes embedded. We know which levers move outcomes. The question is whether we are prepared to use them,” says Acton.
Acton believes the apparent early success of the Two-Pot framework should pave the way for broader retirement reform, including measures such as automatic enrolment and stronger default contribution settings.
“If system design can influence behaviour at exit, it can influence behaviour at entry. Automatic enrolment and calibrated contribution defaults are the next logical step.
“Two-Pot has started to demonstrate that responsible flexibility can improve outcomes over time. The opportunity now is to strengthen the system so that more savings remain invested for longer", says Acton.
PERSONAL FINANCE