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The two-pot retirement system saw thousands of people withdrawing for the second time, showing how much people are battling financially.
Picture: iStock
Since the two-pot retirement system was implemented on 1 September last year, pension fund members made nearly 4 million withdrawals that amounted to almost R57 billion, with the South African Revenue Service (Sars) collecting around R15 billion in tax.
Edward Kieswetter, commissioner of Sars, made these figures public when he was a member of a panel discussion at the 2025 Sanlam Benchmark event last week. Tax collected from withdrawals where pension fund members were in arrears with their tax, added almost R1 billion.
While there were 4 million withdrawals, just under 500 000 of the withdrawals were repeat withdrawals under the two-pot retirement system. Under the two-pot retirement system, pension fund members can withdraw from the savings pot of their retirement savings once every tax year.
The second round of withdrawals therefore started on 1 March, and Kieswetter said that is where about 478 000 pension fund members made second withdrawals. “We expect the repeat withdrawals to continue, because the financial distress of people has not changed.”
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Two-pot retirement system shows people battling to save
The two-pot retirement system was designed to stop people from resigning their jobs just to get their hands on their pension to pay for emergency expenses and other expenses, such as debt. The two-pot retirement system was designed to force people to preserve two-thirds of their retirement savings until they retire.
However, Kieswetter said telling people they must save 15% to 20% of what they earn today, when they cannot even cover the cost of today, is a moral dilemma. “Therefore, in that respect, the two-pot retirement system is the closest to a Goldilocks balance we can get to allow earlier access but also enforcing preservation.”
He pointed out that there is a fundamental problem: the South African economy is not growing, illustrating it with the joke of a man who orders a pizza and, when the waiter asks if he wants it cut into four or eight slices, the man says he wants eight slices because he is so hungry.
“Our problem is that we keep cutting the pie into smaller pieces instead of growing the size of the pie.”
ALSO READ: Two-pot retirement system: People taken aback by amount of tax – survey
Tax man takes slice of the pie in two-pot retirement system
Since the first pension fund members received their withdrawals, they were not happy with how much tax they had to pay on the withdrawals, with some even receiving nothing because the whole amount was swallowed up by arrears tax.
When the panel raised this issue, Kieswetter pointed out that the design of the retirement system defers taxation until withdrawal. “Contributions are tax-deductible, now, and therefore the tax event is always going to happen when you draw on the funds.
“It was designed to work like that. For many people, the tax rate in retirement will be lower than during their working years. With the two-pot retirement system, the tax event takes place on withdrawal.
“The complexity is not the two-pot retirement system design, but the fact that the tax burden comes earlier. Until the policymakers decide differently, you will continue to be taxed on withdrawals.”
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What people used the withdrawals for
Sanlam found in its Benchmark survey that 44% of the withdrawals from funds at Sanlam under the two-pot retirement system were used for debt relief. The survey also highlights growing awareness of the two-pot retirement system, with 92% of fund members now familiar with the changes.
This is a significant increase from just 59% in last year’s survey. Sanlam says among those who accessed their savings under the two-pot retirement system, the majority cited immediate and pressing needs, with 44% saying they will use the funds to pay off debt, while 33% said they will use it for school fees and 28% for family support.
“While it is encouraging to see members using these funds to stabilise their finances, we must be cautious not to let short-term access undermine long-term retirement outcomes. There is a fine balance between flexibility and preservation, and we cannot lose sight of that,” Nzwa Shoniwa, managing executive of Sanlam Umbrella Solutions, said.
ALSO READ: Two-pot retirement system: survey shows what withdrawals will be used for
Do people understand the implications of the two-pot retirement system?
According to the survey, only 49% of members feel confident they understand the long-term impact of accessing their emergency savings pot early, despite 77% saying they are aware of the tax implications.
Shoniwa said this signals a need for clearer, ongoing communication and support, particularly for lower-income members, who are more likely to withdraw and less likely to preserve their benefits until they retire.
“There is some indication that the two-pot retirement system may be prompting more members to engage with their retirement benefits. Our job as an industry is to ensure this increased awareness translates into better decisions in all areas.”
In addition, the survey showed that 88% of pension funds and 83% of participating employers now provide counselling to members considering emergency savings withdrawals, and the infrastructure is improving, but Shoniwa warns that the industry must ensure this support is accessible and trusted.
“The risk remains that today’s withdrawals, while understandable, may come at the expense of tomorrow’s security.”
The survey results include responses from 74 employer funds, 168 participating employers in umbrella funds and 506 employed consumers who are members of a pension fund.
