It is estimated that pension fund members will withdraw up to R100 billion until the end of February under the two-pot retirement system.
It is estimated that pension fund members will withdraw up to R100 billion by the end of February 2025 under the two-pot retirement system.The biggest change in retirement saving in South Africa happened in 2024 with the introduction of the two-pot retirement system that came into effect on 1 September, giving pension fund members access to their retirement savings, but also forcing them to leave the rest intact even if they change employers.
Before the implementation of the two-pot retirement system, some pension fund members resigned to access their retirement fund savings to pay off debt, which Treasury says is detrimental from an economic, financial planning and retirement provision point of view. The withdrawals are taxable based on the member’s marginal tax rate. Thousands of people who applied to withdraw from the savings pot of their retirement savings ended up with nothing because they
Government pension fund members made the most withdrawals based on the amount paid out at R9.3 billion, with members with AlexForbes in second place atR6 billion, followed by Old Mutual with R3.2 billion, Sanlam Corporate with R2.3 billion, Momentum with R3.5 billion and NMG Benefits with R840 million.
Administrators now handle an increased number of claim payments, possibly as high as four or five times the normal number of annual payments, and this will reoccur if members withdraw funds every year.Izak Odendaal, chief investment strategist at Old Mutual, said earlier that the two-pot retirement system will have three immediate effects:
Pension funds will have to sell some investments to realise the cash payouts, but it should not have a disruptive impact on local financial markets, as they will most likely be staggered over a few weeks or even months.
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