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South Africans have been warned against dipping into their two-pot retirement savings component on an annual basis to navigate a financially stable retirement.Speaking during a panel discussion on retirement at the Gordon Institute of Business Science in Johannesburg this week, Nancy Andrews, vice-president of the Institute of Retirement Funds, said pension fund members failed to understand the implications of constant withdrawals from the two-pot retirement system.“Members don’t understand that if you dip every year into your savings component, when you reach retirement age that savings component that is the cash amount that you would access on retirement is depleted,” she said. “If you have debt at the time you retire, you don’t have instant cash to settle that, so you continue to live on the standard you had pre-retirement; you have to live off your retirement annuity.” The two-pot retirement system was introduced in 2024 as a push for compulsory preservation and enables pension fund members to access a portion of their retirement savings for emergencies while they preserve the lion’s share for retirement. Members don’t understand that if you dip every year into your savings component, when you reach retirement age that savings component that is the cash amount that you would access on retirement is depleted.— Nancy Andrews, vice-president of the Institute of Retirement FundsIn 2025, Stats SA said more than R43bn had been paid to retirement fund members who made withdrawals from their savings components.The 2026/27 tax year, which opened in March, marked the opening of the third withdrawal window since the inception of the two-pot system.According to data from Momentum Corporate, people are likely to claim annually for the savings. Of claims submitted since March 1 2026, 5% were from first-time claimants, 33% were second withdrawals and 62% were third withdrawals.Andrews said the South African retirement system is at a pivotal moment due to the two-pot system.“The two-pot system has opened the door for us because for the first time as retirement funds, we have member engagement. We are in a position where we have up-to-date information where we can engage and we can teach,” she said.She said trustee governance is therefore imperative.“Trustee governance should become a habit for trustees, which they get better at,” she said.She said retirement benefit education remains a tick-box exercise for many retirement funds due to the retirement fund and default legislation under the Pension Funds Act.“Retirement benefit counselling is imperative to secure better outcomes for members because you can’t start counselling a member when he is about to leave. The intention behind retirement benefit counselling, particularly for members that are retiring, should take place long before so they understand the implications,” she said.Basil Maseko, director of savings and retirement at the National Treasury, said that South Africa needed to reimagine financial literacy, as many people had insufficient knowledge to make decisions about their retirement.He said the government published the Draft National Consumer Financial Education Policy for public comment in April to support financial literacy. “Sometimes I compare these things to what people know and do about funeral insurance. A lot of people know about funeral insurance, but not many people know about compounding interest or unit trusts,” he said.Maseko said many people save in stokvels, but more could be done to drive savings.“The stokvels can take whatever they have collected and put it in money-market accounts, which is not what stokvels traditionally do, which is to collect money throughout the year to buy groceries. There is a lot of education that needs to take place,” he said.He said education is not just a momentary issue; it is a dynamic issue. “There are new things that come into the market, there are new products that come into the market, and your needs change over time, so you have to save and invest in products that are suitable for the moment and your future,” he said.Business Times
