One Year Into the Two-Pot Retirement System: Early Reflections
First signals from the two-pot system and why savings culture still matters.
On 1 September 2024, South Africa introduced the two-pot retirement system, designed to balance liquidity with preservation: giving members limited access to part of their retirement savings while locking away the rest until retirement. The reform was meant to curb the historic tendency for members to cash out fully when changing jobs, while still acknowledging the pressing need for emergency access in a country where households face ongoing financial strain.
Twelve months later, it is still early days, and while the numbers are striking, my own take-out is that we are only beginning to see how behaviour and systems will settle.
Digital adoption under pressure
What stood out to me is how quickly the industry's digital infrastructure had to mature. From barely 10% of claims being online a year ago, now the majority are. Administrators are reporting surges in logins and claim volumes, and funds that invested in calculators, portals, and mobile channels were better positioned to cope. This pivot is encouraging, but it also points to the underlying strain: operational costs, verification challenges, and backlogs will remain a theme as long as demand is this high.
A nation reaching for liquidity
The take-up itself has been extraordinary: nearly R57 billion withdrawn in just one year, across almost four million withdrawals (Moneyweb). It is hard to interpret this only as opportunism; many South Africans are clearly using the savings pot as a lifeline. The fact that so many claims were repeats within the first tax year suggests that members see this as a reliable safety net. Whether that is sustainable is another question.
Modelling retirement outcomes - a tentative optimism
In a recent EBnet webinar, one of the most interesting points raised was around forecasting retirement adequacy. Discovery shared modelling that suggested even if members continue to withdraw at the maximum levels allowed, they could still end up better off than under the old regime. In the past, projections showed that members who cashed out each time they changed jobs might only achieve an income replacement ratio of around 20% (meaning retirement income equal to 20% of their final salary). With the two-pot system, similar behaviour could lift this figure to about 40%, and if members eventually preserve their savings after mid-career, the projection improves to around 50%.
This represents a significant relative improvement, potentially doubling outcomes compared to before. Yet it remains well below the widely recommended benchmark of 75% income replacement needed for a secure retirement. The early modelling offers a measure of optimism, but it also underscores how much work lies ahead to improve long-term financial adequacy for South Africans.
Education, the missing pillar
Perhaps the clearest consensus is around education. The questions members are asking are simple but telling: How often can I withdraw? How much tax will I pay? What will this mean for my retirement?
Platforms like Paymenow are seeing a surge in engagement on retirement related educational content as households actively seek guidance on their retirement decisions (EBnet). To me, this shows there is a real appetite for clarity. Members aren't necessarily reckless, they are uncertain. Tools and education delivered in familiar, accessible ways (WhatsApp, calculators, nudges) could be just as important as the regulatory design itself.
Too soon to take sides
A year in, I am less inclined to label the two-pot system a success or failure. What we can say is that it has been used. Enthusiastically, even heavily. Systems have been stretched, and members are relying on it in meaningful numbers. At the same time, the early modelling suggests that the new framework could deliver better retirement outcomes than the old one, even under less-than-ideal behaviours.
That said, even if Discovery's modelling plays out, it will still not be enough to solve South Africa's broader retirement crisis. A system tweak alone cannot replace the fundamental need for more people to save, and to start saving earlier. Until participation rates rise and contributions increase, the two-pot system may help, but it cannot fully close the gap between what retirees need and what they will have.
What seems clear already is that the two-pot system has fundamentally changed the conversation: about liquidity, preservation, and what it really means to plan for retirement in a financially strained society.
