Two-Pot System Unveils Harsh Reality of Household Finances in South Africa

Two years after its implementation, South Africa's novel 'two-pot' retirement savings system, which permits workers limited access to a portion of their accumulated funds without requiring resignation, has achieved its core objective. However, the insights gleaned from these early withdrawals paint an uncomfortable picture of the financial pressures facing many households. Rather than being used for discretionary spending or 'soft-life' luxuries, these accessed savings are primarily bridging the gap for essential monthly needs.

Michelle Acton, Chief Customer Officer at Old Mutual Corporate, highlights this shift. Old Mutual conducted surveys among its members at various stages: prior to the system's launch, after the initial six-month window, and following the tax year spanning March 2025 to February 2026. Responses from approximately 35,000 claimants in the latter two surveys revealed a critical change in motivation. While pre-launch expectations suggested funds would cover emergencies and debt, Acton noted that the latest findings indicate 'basic living' as the predominant reason for withdrawals, superseding debt repayment. Members are reportedly utilizing these funds for groceries, family support, school fees, rent, and electricity. Where debt is being addressed, it is largely unsecured personal and familial loans, rather than larger commitments like home or vehicle financing, indicating a struggle to meet fundamental income-to-survival gaps.

This emerging reality has matured the national conversation around the two-pot system. The focus has shifted from whether individuals should be 'allowed' to access their savings to a more profound question: what becomes of the capital that is legally mandated to remain invested for long-term retirement? Despite the immediate pressures, there is some positive news from Old Mutual: preservation rates have increased by 33%, and cash withdrawals upon exiting employment have dropped from 61% to below 50%. Furthermore, the number of individuals indicating an intention to make future withdrawals has nearly halved.

The Sanlam Benchmark Survey for 2026 corroborates these trends, showing a notable increase in member engagement. Sanlam reported that 84% of stand-alone funds and 80% of umbrella funds experienced heightened participant involvement since the system's inception, suggesting a renewed attention to retirement planning not seen in years. This development is particularly relevant for East African and broader African economies, where similar challenges of financial literacy and long-term savings often clash with immediate socio-economic pressures.

However, Kanyisa Mkhize, Chief Executive of Sanlam Corporate, offers a crucial caution: awareness does not equate to adequacy. True retirement confidence, Mkhize emphasizes, is cultivated over decades through consistent preservation of funds, increased contributions where feasible, and diligent debt management. The profound lesson from South Africa's two-pot system is that while the 'savings pot' serves as a vital pressure valve for a populace frequently living on the financial edge, the 'retirement pot' remains the fundamental promise that the entire system will not collapse into mere short-term subsistence.

The path forward, therefore, is not to stigmatize those who make withdrawals due to necessity. Instead, the focus must shift to empowering individuals to safeguard their remaining capital, understand tax implications, avoid expensive debt, and proactively establish emergency reserves independent of their retirement portfolios. The critical warning is clear: if the savings component consistently becomes an annual source for daily necessities, the system risks alleviating one immediate crisis only to exacerbate a deeper, long-term one for countless citizens.

This story first appeared in the Daily Maverick.