Retirement fund members have withdrawn a staggering R57 billion under South Africa’s two-pot retirement system, raising alarms about the long-term financial security of millions. New data from the South African Revenue Service (SARS) reveals that over 4 million withdrawals have been processed since the system’s implementation in September 2023, with nearly 500,000 being repeat withdrawals.
Growing Fears of a Poor Retirement Crisis
Old Mutual, one of the country’s leading financial services providers, has warned that the high withdrawal rate—particularly among lower-income earners—could leave many South Africans financially vulnerable in retirement.
John Manyike, Head of Financial Education at Old Mutual, expressed deep concern over the trend, stating that frequent withdrawals “erode the value of retirement funds”, potentially leaving retirees with insufficient savings to maintain their standard of living.
Who is Withdrawing—and Why?
According to Manyike, the most affected groups are:
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Income bracket: Individuals earning between R5,000 and R10,000 per month.
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Age group: Workers aged 36 to 40, who are making repeated withdrawals.
A survey conducted by Old Mutual found that:
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45% of withdrawals were used to pay off debt.
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18% went toward school fees.
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11% were used for bond payments.
Manyike questioned whether these expenses truly qualified as emergencies, which the savings pot was designed to address. “If people keep withdrawing for non-emergencies, they risk retiring with almost nothing,” he cautioned.
Long-Term Risks: A Bleak Retirement Future
With life expectancy increasing, Manyike warned that retirees could face severe financial strain, possibly ending up with monthly payouts lower than government grants. “If you don’t save enough, you’ll downgrade your quality of life,” he said, emphasizing that retirement funds should ideally replace at least 70% of a person’s last salary.
Calls for Greater Financial Education
To curb reckless withdrawals, Manyike urged collaboration between government, employers, and financial institutions to improve financial literacy. “We need to educate employees on the long-term impact of early withdrawals,” he said, suggesting that companies should facilitate retirement fund workshops.
He also called for further investigation into whether withdrawals were genuinely being used to settle debts, as self-reported data may not reflect actual spending habits.
What’s Next?
As the two-pot system enters its second year, the financial sector is watching closely to see if withdrawal patterns stabilize—or if South Africa faces a looming retirement poverty crisis.
For now, the message is clear: Think twice before tapping into retirement savings today—it could leave you struggling tomorrow.
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