Especially the increase in repeated withdrawals is a red light that cannot be ignored. (Photo: Created by Adobe Stock with AI)
The increasing number of withdrawals from the two-pot system is a clear sign that many households are still caught in a financial stranglehold.
Recent data shows that millions of withdrawals have already been processed and paid out since the system went live, with continued high volumes still being seen in the new tax year.
This trend is particularly reflected in patterns of repeated withdrawals. This suggests that consumers are increasingly relying on their retirement savings just to keep their heads above water.
According to Thys van Zyl, CEO of Everest Advisory Services, these trends highlight the value of the system, but also the substantial risks it poses for the future.
“The two-pot system was designed to provide short-term relief, and it is clear that it does fulfill that role. However, the scale and frequency of withdrawals point to a larger problem – many South Africans are under sustained financial pressure.”
Van Zyl believes that the increase in repeated withdrawals is a red light that cannot be ignored. He warns that the purpose of the funds is fading.
“When individuals start using their savings pot on a regular basis, it moves from an emergency measure to a financial survival mechanism. This is where the real risk lies.”
The danger of compound growth
Available data indicates that a significant proportion of members who have already withdrawn once, return year after year to withdraw again. Many of these members always withdraw the full amount available, which shows that retirement savings are increasingly being used to supplement monthly income, rather than as a last resort.
“This behavior has serious long-term consequences. Each withdrawal reduces the potential for compound growth, which is one of the most important factors in overall growth of retirement savings. What seems like a relatively small withdrawal today can cause a significant deficit in retirement over time.”
Although the system has improved access to funds, and reduced the need for individuals to resign to access their money, it brings new challenges. Van Zyl points out that the ease of access means withdrawals have become faster and simpler, which may also encourage more frequent use.
Print across all income groups
The wider economic environment in which South Africans find themselves further exacerbates the situation. Rising costs of living, high interest rates and ever-increasing debt levels are putting pressure on households across the spectrum, not just those traditionally considered needy.
“Financial pressure is no longer limited to low-income households. We see signs of tension across the spectrum, which is reflected in withdrawal patterns and rising credit use,” says Van Zyl.
He further emphasized that the system does offer flexibility, but that informed decision-making is critical to ensure fair outcomes for clients.
“The reality is that retirement savings should not become a source of cash flow. If used incorrectly or too often, it can seriously undermine financial security over the long term.”
He advises consumers to consider each withdrawal carefully and seek professional advice where possible.
“Short-term relief should not come at the expense of long-term stability. Consumers should carefully consider the consequences based on their individual circumstances and seek independent financial advice, before making withdrawal decisions that will affect their future retirement plans or requirements.”
According to Van Zyl, the current trends should serve as an important reminder of the necessity of financial discipline and planning.
“The two-pot system is a powerful tool, but like any financial tool it must be used responsibly. Without proper planning, the long-term costs of short-term relief can be much greater than many people realize.”