When South Africa launched its two-pot retirement framework in September 2024, media reports predicted a financial disaster, warning that struggling citizens would rapidly drain their savings. However, early industry data suggests a far more optimistic reality. According to Guy Chennells, Chief Commercial Officer of Discovery Corporate & Employee Benefits, this regulatory shift is helping to prevent South Africans from retiring in poverty and could significantly improve the final savings of the average worker.
Historically, South Africa’s retirement landscape had a critical flaw. Under previous regulations, employees who resigned could cash out 100% of their accumulated pension. While this provided an immediate financial lifeline, it often undermined long-term security, leaving many individuals financially vulnerable in old age. The newly implemented system is designed to address this weakness.
The reform changed the old rules by dividing retirement savings into three categories. The first is the vested component, which includes all funds accumulated before September 2024. Members may still withdraw this money when they resign, but only once.
The second is the savings pot. It was initially seeded with 10% of vested savings, capped at R30,000, and now receives one-third of all new monthly contributions. Members are allowed one withdrawal per tax year, provided the amount is at least R2,000.
The final category is the retirement pot, which locks away the remaining two-thirds of future contributions until retirement. For new entrants to the workforce, there is no vested component at all, removing the temptation to cash out their savings when they resign.
Withdrawal behaviour has also challenged early fears about the system.
After an expected initial surge in claims, monthly withdrawal rates stabilised fairly quickly. A small spike occurred at the start of the new tax year in March 2025, driven largely by repeat claimants. Interestingly, average payouts fell sharply for both first-time and repeat withdrawals. This may naturally discourage frequent withdrawals in future.
Financial planners often suggest a net replacement rate of about 75%, meaning retirees should aim to retain roughly three-quarters of their final salary. Under the old system, frequent job changes could severely undermine this ratio.
Data models show substantial improvements under the new rules. Consider a 25-year-old earning R240,000 a year. Under the old system, cashing out every five years could reduce their replacement ratio to just 4%. Under the two-pot framework, even if they withdraw from their savings pot every year until age 45 before preserving the rest, their replacement ratio could rise to 48%.
Similarly, a 40-year-old late starter who regularly cashed out under the old system could also end up with a replacement ratio of about 4%. Under the new framework, even with maximum annual withdrawals, they could still retire with close to 20% – nearly five times better.
The benefits extend beyond individuals to the wider economy.
In simple terms, whether people save diligently, dip into their accessible funds occasionally, or withdraw from their savings pot more regularly, the new rules still leave them better off than before. When these individual outcomes are applied to the broader national economy, the potential impact is equally significant.
Under the old system, total industry assets were projected to grow from R4 trillion today to R50 trillion over four decades. The two-pot framework changes that outlook dramatically. Even if every eligible citizen makes annual withdrawals, national retirement assets are projected to reach R150 trillion. If current behavioural trends continue, with six in ten workers preserving their wealth, the national asset pool could exceed R200 trillion, making this framework a powerful driver of long-term economic stability.
References
- Two-pot system could quadruple South Africans’ savings, Discovery says – Posted on 28 August 2025 by Nettalie Viljoen.
- Two-pot reform does not unlock vested RA benefits – Tribunal – Posted on 16 February 2026 by Moonstone Information Refinery
- Two-pot withdrawals surge as repeat claims reshape savings behaviour- Posted on 19 March 2026 by Moonstone Information Refinery
- https://www.ebnet.co.za/retirement-preservation-increase-as-two-pot-system-reshapes-member-behaviour/ by Anna Siwiak. [26 March 2026].
- https://www.fanews.co.za/article/retirement/1357/general/1358/
- Retirement Preservation Increases as Two-Pot System Reshapes Member Behaviour [24 March 2026].
- Digital access reshapes retirement withdrawals under South Africa’s Two Pot system. South Africa’s Two-Pot system