The most significant happening in the retirement fund industry in 2024 was the implementation of the two-pot system on 1 September 2024. The industry waited in anticipation to witness what would happen. Would there be a significant uptake? Would members change their minds after realising the effect of taking money out of their savings pot?

SARS reported that as of 31 January 2025, some R43 billion had been paid out to retirement fund members who withdrew money from their savings pot (10% of a member’s fund credit as of 31 August 2024, up to a maximum of R30 000, was automatically moved to the member’s savings pot).

SARS received 2 664 279 applications for tax directives for savings pot withdrawals. A total of 2 403 379 tax directives were approved for funds to be released. The remainder were declined for a variety of reasons, including incorrect identity numbers or tax numbers. SARS said its two-pot calculator on WhatsApp has been used 90 283 times since the implementation of the process.

FSCA Reports on the Two-Pot System Implementation

Following the implementation of the two-pot system and the high number of withdrawal applications, the FSCA released the following statistics:

• 887 active funds under FSCA supervision cover 155,000 participating employers and 9.6 million members.
• 42% of members who made withdrawals had a fund credit between R100,000 and R400,000, with the highest number of withdrawals among those with a credit of R100,000 to R250,000.
• The third-highest number of withdrawals came from members with a fund credit of only R20,000 to R50,000.
• Most withdrawals were made by members with a pensionable salary between R180,000 and R239,988 and between R60,000 and R119,988 per year.
• Higher-income earners (those earning over R600,000) made fewer withdrawals.
• The majority of withdrawals were made by members aged 31 to 41, followed by those between 41 and 51.

Challenges Faced

There were issues. According to the FSCA, members expressed frustration with:

• Poor communication from funds.
• Administrators’ websites being offline.
• Delays in receiving their payments.
• High transaction fees.

However, formal complaints remained low:

• The FSCA received only three formal complaints, two of which have been resolved.
• The Pension Funds Adjudicator received 23 formal complaints and 1,450 inquiries, which were referred to funds and administrators.

Additionally, members raised concerns about the high fees charged by funds and administrators. In September, the FSCA issued an Information Request requiring self-administered funds and administrators to report their withdrawal processing fees.

• From its analysis, the average fee per two-pot withdrawal was R357.
• The FSCA plans to engage with administrators charging higher fees to understand their reasoning and ensure fairness.

A Broader Economic Concern

The high volume of withdrawals underscores a serious issue affecting many South Africans: financial constraints and limited access to basic services.

The President acknowledged these challenges at the recent State of the Nation Address (SONA). It is hoped that the G20 Summit, to be held in Johannesburg later this year, will address these issues under the theme: “Fostering Solidarity, Equality & Sustainable Development.”

The Upside of the Two-Pot System

Despite the challenges, there were positives:

• SARS coped well with processing the high number of withdrawals.
• The FSCA approved rule amendments rapidly to facilitate the process.
• Except for a few complaints, the industry worked efficiently to achieve the end goal.
• Members struggling financially received payouts within weeks of their applications.
• Due to legislative withdrawal limits, estimates suggest that retirement outcomes for new members could be twice as strong by the time they retire.

What’s Next?

The two-pot system allows members to make one withdrawal from their savings pot per tax year.

With 1 March 2025—the start of the new tax year—around the corner, will we see another application surge?

We will keep you updated on further developments regarding this and other industry-related matters.