The two-pot temptation that could wreck your retirement

Preliminary numbers are still trickling in, but alarms have already sounded from at least three of the larger retirement fund administrators – Old Mutual, Alexforbes and Momentum – regarding the cumulative sums being withdrawn from the retirement savings pool.

Alexforbes recorded more than 140,000 claims during the first week of March alone. The first claim was submitted at 12.01am on Sunday, 1 March, underscoring the immediate demand for access to savings. “The early response to the new tax year highlights that many members require prompt access to their savings,” said Vickie Lange, head of solutions enhancement at Alexforbes.

Rigitté Van Zyl, executive for FundsAtWork and Group Insurance at Momentum Corporate, said that of the claims submitted since 1 March, 5% were first-time claimants, 33% were making their second withdrawal, and 62% were on their third withdrawal.

“The data shows that those who have accessed the system once are increasingly likely to do so annually. Furthermore, among those who choose to claim, the vast majority are requesting 100% of their available savings pot. This suggests that the system is being utilised to its maximum capacity by a specific segment of the membership to manage ongoing financial requirements,” she said.

Proposed access to retirement savings pot

National Treasury is considering opening up the retirement savings pot to withdrawals in cases of “severe financial distress”.

Approached directly for more details, National Treasury reiterated that before the two-pot system, fund members would resign in order to access their retirement savings for a variety of reasons.

National Treasury has received several policy recommendations on the two-pot system and retirement reforms in general – one of which was the prejudice of having an unemployed member of a fund with funds preserved in a retirement fund but without any means to sustain themselves.

“Allowing access to the retirement pot in the two-pot retirement system in cases of dire financial distress is, therefore, not a new proposed amendment to the two-pot system,” Treasury said.

In previous statements, it stated that “legislative amendments dealing with withdrawals from the retirement component if a member of the retirement fund is retrenched and has no alternative source of income, will be considered in the second phase of the implementation of the two-pot retirement system.

“The proposal will not remove the preservation element under the two-pot system. It rather looks at cases of retrenchment, which is an involuntary event unlike resignation, alongside the lack of alternative income sources or employment,” Treasury clarified. The proposal is strictly meant for retrenched workers who have no other sources of income and are in severe financial distress.

Currently, a retrenched member has access to the savings pot and the pre-September 2024 retirement savings or what is called the vested pot. Post September 2024, a retrenched member has two-thirds of his or her retirement savings in the retirement pot, which is not accessible. Workers who started new jobs post September 2024 and get retrenched would not have access to a vested pot.

Treasury confirmed that a discussion note detailing possible options in terms of how and when to allow access to the retirement pot in cases of financial distress will be released soon for public consultation, including engagements with industry on the effect of this proposal.

Withdrawals largely to meet cost-of-living crisis

Van Zyl said that in the first 11 days of March alone, 38,148 claims were received, representing 8.6% of the membership. While the average claim value has fluctuated – from R12,666 in September 2024 to R9,290 in March 2026 – the high volume of sub-R10,000 claims (71% of the total) suggests these funds are primarily used for modest, short-term liquidity needs.

Insights from Eighty20’s 2025 Q4 Credit Stress Report provide context for these withdrawal patterns. Over-indebtedness remains a significant challenge, with 40% of credit-active South Africans in default (three or more months in arrears) on one or more loans.

The report notes a R12-billion increase in overdue balances in the final quarter of 2025.

It’s important to note that (despite the current outlook) things were actually looking up in the last quarter of 2025:

• Vehicle sales hit a 10-year high;
• South Africa’s credit rating was upgraded from BB- to BB;
• Petrol prices fell by 1.3% quarter-on-quarter, driven by a decline in oil prices;
• FNB/Bureau for Economic Research Consumer Confidence Index rose to -9;
• There was a further drop in the repo rate to 6.75%; and
• The rand continued to perform favourably against the US dollar, strengthening by nearly 4% quarter on quarter.

However, since then, the Middle East conflict has seen oil prices soar to almost $120, before settling just under $100. Efficient Group economist Dawie Roodt said petrol prices could increase by roughly R5 per litre and diesel by about R8 per litre as a result of both the Middle East conflict and a weakening rand.

“People are juggling multiple and often conflicting financial priorities, from school fees and household costs to debt repayments and family responsibilities,” said Lizl Budhram, head of advice at Old Mutual Personal Finance.

“When you’re pulled in many directions at once, another withdrawal can feel like the quickest solution, but good financial advice helps you step back, weigh the trade-offs and avoid undoing years of disciplined retirement planning.”

Read this BEFORE you make a withdrawal

Before you contemplate a withdrawal from your savings pot, dear reader, let’s look at the monetary effect – both immediately and in the long term.

👩 Sally is a 35-year-old full-time employee with a taxable income of R370,000. Based on the 2026/27 income tax table, her tax liability will amount to R58,772 ( R44,118 plus 26% on amounts over R245,100 minus primary rebate of R17,820).

💰📈If Sally decides to access a withdrawal benefit of R25,000, she will be pushed into a higher tax bracket and will be liable for tax of R65,867 (R79,998 plus 31% above R383,100 minus primary rebate of R17,820).

Another example of the withdrawal impact:

⏳😢 Sally plans to retire at 65, but withdraws R50,000 at the age of 35. If you assume her retirement savings were earning returns of 10% a year for 30 years, she would be losing R872,470 that could have been used to provide her with an income in retirement.

Rita Cool, head of individual consulting strategy at Alexforbes, double-checked the calculations for me and added that the R872,470 does not take inflation into account. “Assuming 6% inflation, it is similar to losing R151,905 in today’s terms and at 3% inflation, it would be like losing R359,446,” she pointed out.

Now, I’m not advocating for debt. In fact, I’m in favour of avoiding it wherever possible.

HOWEVER, if you really needed, say R50,000 now, you could take a personal loan (and for this example, I used a direct loan provider, which would be considerably more expensive than your bank) over two years at an interest rate of 27.75% (stay with me) and a monthly repayment of R3,053. Including the initiation fee and monthly service fees, a personal loan would cost you a total of R76,205 over the two years – compared to losing R151,905 or R359,446 in today’s terms (see above).

It’s easy to ignore the bigger picture if you are focused on what’s coming into your bank account today – and in the current economic environment, there are no easy choices. Hopefully, the calculations above will give you food for thought.