What pension fund members used the money for shows just how desperate and financially stressed consumers are.
Pension fund members whose funds are administered by Liberty mainly used the money they withdrew from the savings pot under the two-pot retirement system to pay off debt and buy used cars.
A year after the two-pot retirement system came into operation on 1 September last year, pension fund managers are looking at the data and the lessons everybody can learn from how the two-pot retirement system was used, especially since it spans two financial years, which means members could withdraw twice over the past year.
Pension fund members could withdraw a portion of their retirement savings under the two-pot retirement system, and can continue to do so once every financial year that runs from 1 March to 28 February.
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What did members do with the two-pot retirement system money?
One of the main questions about the two-pot retirement system is what members did with the money? According to John Taylor, head of investment and benefit consulting at Liberty, debt came first, followed by essential spending and asset deposits.
“Independent analysis combining credit bureau, Sars[South African Revenue Service], Sarb [South African Reserve Bank], Statistics SA and transactional data indicate a large share of withdrawals went to settle outstanding debt, while used car registrations spiked in September and October 2024 [the highest since 2012], suggesting deposit-funded vehicle purchases.
“Retail trends also show modest essential goods spend and typical seasonal patterns otherwise. Early signal checks on bank and platform commentary from late 2024 reinforced a debt-repayment narrative, tempered by the Sarb’s caution that a material portion also went to consumption, reflecting the duality of relief compared to long-term adequacy.”
Fahiem Esack, lead specialist for operations, analytics and insights at Liberty, says the two-pot retirement system fundamentally changed member behaviour as it created regulated, once-per-tax-year access to a “savings component” while preserving two-thirds of ongoing contributions to a retirement component, improving long-term preservation by design.
By June 2025, pension fund members made approximately 4 million withdrawals totalling about R57 billion, with Sars reporting R15 billion collected in taxes, underscoring the scale of financial distress as well as the two-pot retirement system’s tax-timing realities. Repeat behaviour is emerging across the industry, showing roughly 478 000 members withdrew again in the next tax year.
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Surge in two-pot retirement system withdrawals at first
Esack says it saw a surge of withdrawals before it stabilised. “Volumes spiked significantly at the beginning, straining operations that included seeding, validations and pay-outs. However, Liberty says the implementation of digital channels proved to be a significant game-changer and allowed members to seamlessly claim and receive their funds well within service levels.
By early 2025, new claim volumes had reduced significantly, barring a spike in March 2025 as members were allowed to claim again at the start of the new tax year. Current volumes are stable, and with increased adoption of digital channels, they are quite manageable.
Service levels for withdrawal and retirement claims remain a focus area, as these claim types have become more nuanced with the implementation of additional pots.
Darshana Kooverjee, head of umbrella fund solution product at Liberty, says over and above offering seamless straight-through processing, Liberty’s digital channels allowed them to be in direct contact with its members, affording them the opportunity to share their latest contact details during the process. Kooverjee says this supported improvements in member communications, which remain important for member trust and employer satisfaction.
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Why such a storm in a teapot about the two-pot retirement system?
Taylor says the two-pot retirement system delivers short-term liquidity while implementing some level of enforced preservation.
“However, it requires targeted member guidance, lean operations and portfolio liquidity planning, especially where member engagement, fee transparency, and employer policy choices materially shape outcomes.”
Taylor says Industry briefings and platform data show repeat withdrawals are increasing (close to half a million members), implying persistent financial pressure on members and the need for debt and cash-flow counselling at the point of decision to withdraw under the two-pot retirement system.
“Ongoing work by the Financial Sector Conduct Authority (FSCA) highlights that transaction fees and implementation costs, and an early read, put the average savings-withdrawal transaction fee around R357.”
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Who are the members withdrawing funds under the two-pot retirement system?
Who is withdrawing from their savings pots under the two-pot retirement system? Kooverjee says the FSCA’s initial data shows the highest withdrawal activity among members with fund credits of R100 000 to R250 000 in the age groups 31-41 and 41-51, with pensionable salaries between roughly R60 000 to R120 000 and R180 000 to R240 000 per year, again suggesting financial pressure on the middle-income group.
Esack says 83% of all claims received were paid, while 16% were not eligible to claim due to claim values exceeding available balances, insufficient balances, or duplicate claims. The average pensionable earnings of people claiming are a little more than R200 000 per year.
In addition, Esack says, at Liberty, 37% of savings claims were paid to people in their 40s, while 38% of claims were paid to 30-somethings. The average gross value of a claim was approximately R11 500. The good news for Liberty was that 59% of active members did not touch their savings pot.
“Liberty statistics show that there has been an increase of over 10 times in terms of the number of members preserving their retirement fund benefits. Encouragingly, there has been a 75% increase in the number of benefits preserved within the retirement funds.”
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Why does this matter?
Taylor says a key rationale for the two-pot retirement system was to introduce an element of compulsory retirement savings preservation for individuals, where some benefits would be retained for retirement funding.
“While we expect savings component claims values to stabilise in the next few years, we expect retirement component preservations to continue to increase in magnitude as more months of contributions are accumulated, meaning improvements in the amounts preserved over the coming 10 to 20 years.”
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And then there was the tax man waiting for the two-pot retirement system withdrawals
Many members who withdrew from their savings pot were surprised by the amount of tax they had to pay. Esack says the two-pot retirement system changes when tax is paid upon savings withdrawal at marginal rates, not if tax is paid as contributions remain tax-deductible.
“Sars collected approximately R15 billion until June 2025, but member dissatisfaction often stems from the difference in savings pot claims amounts between the ‘requested’ (gross) and the ‘netpaid’ claim values after taxes.”
Esack points out that Liberty implemented a novel approach where the savings claim fee is deducted from the remaining vested and/or retirement pot amounts, maximising the savings claim value for individuals in need.
