Two-pot retirement system: the trends one year on

Since the two-pot retirement system was introduced exactly a year ago on 1 September 2024, several trends have been spotted based on the data, such as who tends to withdraw from the savings pot of their retirement savings and what they spend it on.

Vickie Lange, head of corporate best practice at Alexforbes, says that since its introduction, the two-pot retirement system has reshaped South Africa’s retirement savings by offering a balance between long-term goals and short-term financial needs.

Alexforbes administers 1.1 million actively contributing members, and more than 650 000 savings pot claims worth R9.5 billion were processed in the first year of the two-pot retirement system. De Lange says claims were finalised on average in seven working days.

In the current tax year (from 1 March 2025), over 270 000 claims worth R2.5 billion have already been paid.

She says despite the high claim volumes, Alexforbes maintained strong administrative performance, processing 95% of its 150 000 annual exit claims (resignation, retrenchment and retirement) within agreed servicing standards.

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Alexforbes noted these key member insights from the two-pot retirement system data

• A high rate of repeat withdrawals emerged, with 70% of members who accessed their savings pots this tax year also withdrawing last year. The Alexforbes member survey showed that 80% of withdrawals were used to reduce debt or cover essential living costs.
• In September 2024, more than 230 000 savings pot claims were processed under the two-pot retirement system, representing 60% of total claims in the first tax year.
• In March 2025, claims exceeded 95 000, a marked increase for tow-pot retirement system claims at the start of the new tax year.
• More than 35% of members withdrew most of their once-off seed capital allocation.
• 5% of provident fund members older than 55 on 1 March 2021 opted into the two-pot retirement system by 31 August 2025. From Monday, members who did not opt in will no longer have this option.
• 65% of members did not withdraw from their savings pots which shows that many are making informed decisions about preserving their long-term retirement savings.

Lange says of the 35% who did withdraw:

• 14% withdrew in both tax years
• 15% withdrew only in the previous tax year
• 6% withdrew for the first time this tax year.

ALSO READ: Two-pot retirement system complaints mainly about unpaid contributions

Some members are making smart choices with the two-pot retirement system

Lange says Alexforbes continues to strengthen digital platforms and tools that empower members to make informed decisions, including:

• AF Connect, the member portal, enabled 90% of savings pot claims under the two-pot retirement system to be submitted online. In addition, the Two Pot Calculator and My Money Matters toolkit provided relevant guidance.
• Digital exits, a process initiated when members leave an employer, help members navigate options for their vested, savings and retirement pots, with direct access to advice via smartphone.
• Solutions such as AF+ and AF Rewards extend support. AF+ provides financial advice and debt solutions, while AF Rewards helps members stretch their household budgets with discounts on everyday essentials.

Lange says while withdrawals from the savings pot under the two-pot retirement system have drawn attention, the retirement pot is the driver of improved long-term outcomes. Since 1 September 2024, two-thirds of member contributions (66.7%) have been channelled into retirement pots, with an average balance of R22 000.

These funds are invested until retirement, helping to secure significantly better incomes. Alexforbes estimates that retirement outcomes for new members could improve by two to two and a half times. This is critical given that current replacement ratios average only 31% (which is equal to R310 of income for every R1 000 earned before retirement), she says.

ALSO READ: Two-pot retirement system: financial lifeline or long-term liability?

What to keep in mind if you consider withdrawing under the two-pot retirement system

Lange says members who consider withdrawing under the two-pot retirement system must remember:

• Withdrawals reduce both retirement income and cash at retirement.
• Withdrawals are taxable and may push members into a higher tax bracket.
• Savings pots should be preserved for genuine emergencies.
• Members can boost their retirement savings through higher or voluntary contributions.
• Preserving the vested pot until retirement protects your long-term benefits.
• Financial advice is strongly recommended before making decisions about retirement savings.

“The introduction of the two-pot system is one of the most significant shifts in South Africa’s retirement funding history. Already, members are engaging more actively with their savings, while retirement pots are compounding towards stronger future outcomes.

The two-pot retirement system is delivering benefits today, while shaping a more sustainable and member-focused retirement environment for tomorrow.”