Advisers urged to step up as two-pot withdrawals reshape retirement
An early assessment of pension fund member behaviour under the two-pot retirement system has seen a 10-fold improvement in the number of fund members choosing to preserve their savings. This fact emerged during a 12-month’s-later two-pot update by Liberty Corporate.
A win for compulsory preservation
John Taylor, Head: Investment and Benefit Consulting at the firm, got the presentation underway saying the industry had collectively processed well over four million transactions involving over R57 billion in gross withdrawals since 1 September 2024. The South African Revenue Service (SARS) has also benefited to the tune of more than R15 billion in additional tax collections. He reminded the audience that two-pot was the biggest win for compulsory preservation since the Pension Funds Act (PFA) was enacted in 1956.
“Prior to two-pot coming into place, only around 7% of members would preserve their money when changing jobs,” he said. “The other 93% took that money in full, paying whatever tax was due at that point.” Under the new retirement rules, these members must leave two-thirds of their accumulated retirement capital in the fund. Taylor celebrated this step-change in the retirement funding landscape, adding that the country would have to wait two or three decades to see the full impact of the two-pot intervention.
As expected, the industry experienced a massive spike in withdrawal requests when two-pot went live. “We had no idea what member claim volumes would look like, but we knew that there would be surges at certain points in time,” said Fahiem Esack, Lead Specialist: Operations, Analytics and Insights at the insurer. As it turned out, Liberty saw 55% of two-pot withdrawals taking place in the first three months of the year, with the balance spread across the remaining nine months.
Clear spikes in withdrawal activity
There were spikes in March 2025, being the earliest members could make a second withdrawal, and again in September, due to some confusion among members who thought they had to wait 12 months after the first withdrawal before dipping in again. He then shared some news that will have financial advisers and retirement funds grinning from ear to ear: “Only 41% of our active umbrella fund members have claimed thus far; 59% have not.” Other interesting stats were that 75% of members had used the insurer’s digital tools.
Your writer was intrigued by Liberty’s use of the word ‘claim’ for ‘withdrawal’ throughout the presentation. In his view, you make a claim against an insurer after suffering an event covered by a risk policy, whereas you withdraw from a savings pot that holds money that you have diligently set aside for your retirement. Semantics aside, the insurer revealed that 83% of withdrawal requests received from its members had been processed, with the remainder declined due to members trying to claim more than once in a year, or trying to draw too much.
Panel moderator, Sewela Langeni, credited extensive member communication and engagement for the relative success in getting members to leave their savings pot untouched. She asked Darshana Kooverjee, the group’s Head: Umbrella Fund Solution Product, to comment on how communication contributed to positive behaviour shifts. On the whole, the fund’s messaging focused on member needs and sought to steer them toward positive outcomes by educating them about the trade-offs in accessing their savings pot.
Encouraging signs of behavioural improvements
Kooverjee hypothesised that the 59% of umbrella fund members who had not dipped into their savings were either trying to grow that money until retirement, or keep it on hand for real emergencies. She said that deeper member engagement was needed to help navigate members through the complexity introduced by the two-pot retirement system. Common questions received from members included what the savings pot was, how accumulated capital was split across the respective pots, and how each component evolved over the retirement savings journey.
Langeni asked the panel to share further insights on behavioural changes among members. “The two-pot retirement system allows members the opportunity to dip into their savings pot once every tax year,” Esack said. He added that while the amounts available were not always adequate to resolve financial challenges, members at least had an alternative source of funds rather than cashing out their vested pot savings in full, or taking short-term loans. Taylor chipped in that the sheer increase in member participation through the process was refreshing.
The panel encouraged fund members to seek financial advice rather than relying on family and friends to guide them. “With this level of complexity, you do need to have an expert breaking it down for you,” the moderator said. Kooverjee agreed, saying that much of the umbrella fund’s communication encouraged members to speak to a financial adviser. “It is now even more important for members to speak to their adviser ... they need to be informed by their individual circumstances before making changes,” she said.
A wide definition for emergencies (sic)
Taylor said it was quite difficult to say with certainty what members were using their savings pot withdrawals for, though debt repayments, school fees, higher education costs and general children’s expenses appeared to make up a large part of the story.
“There has been a certain amount of stigma that has come about, and some members have been a bit anxious to share exactly what they are using the withdrawal for,” he explained. Pollsters are at the mercy of individuals who might frame a withdrawal reason in line with the perceived ‘emergency qualifier’ so as not to get into trouble.
As the session drew to a close, panellists agreed that the two-pot system is at the beginning of its journey. Taylor described it as an exciting step towards building a sustainable, meaningful retirement system that caters for a far bigger section of the working population in the country. Kooverjee stressed that while the system introduced complexity, it was important for members to understand the short-term and long-term implications of withdrawals. This requires ongoing education and engagement between fund members and funds, and discussion between individuals and their financial advisers.
Regulatory design plus informed decision making
Esack concluded that the initial surge of withdrawals seen at go-live is unlikely to be repeated, pointing instead to greater stability and improved digital engagement with members. The consensus was that the two-pot system has set South Africa on a new course. Outcomes will be defined by the interaction of regulatory design and members’ decision making, the latter informed by support from financial institutions and advice professionals.
Writer’s thoughts:
Of the R59 billion in two-pot withdrawals released into the economy, R15 billion went to the taxman and the balance to cover household expenses or settle debt. What role can financial advisers play in balancing clients immediate needs with long-term security? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.
